Asia/Pacific

VantagePoint: China – Reassessing Risks and Opportunities

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As the second largest economy in the world, China remains an important destination for global investor capital. Yet, the pace and scope of China’s regulatory crackdown are causing concern. In this edition of VantagePoint, we review the nature of regulatory developments and their impact on the investment opportunity set. We believe that dedicated, strategic allocations to Chinese assets are still warranted. Investors should carefully consider their sector exposure and evaluate managers’ capabilities in the current regulatory and geopolitical environment.

Contagion Risk From China Evergrande Likely Low

Fears that a default by China Evergrande Group could trigger a financial crisis has led to some weakness in global equities in recent days, with the MSCI All Country World Index falling 3.5% from its peak. While Evergrande is likely to default and require a major restructuring, we view fears of a broader financial crisis as overblown.

China’s Onshore Bond Market: An Update

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Interest in China’s onshore bond market has been rising steadily since 2016 when the market was thrown open to foreign investors. Foreign holdings of onshore bonds now exceed US$400 billion and are set to rise further. We think the market warrants further attention from global investors, given Chinese bonds continue to offer higher yields and lower correlations than those found in other major bond markets, with the potential to bring portfolio diversification benefits.

Should Investors Avoid China Due to Rising US-China Tensions?

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No, we still believe China remains an important exposure for investment portfolios. However, US-China tensions will continue to escalate. Investors need to reaffirm both the rationale and implementation of their China investment strategy and must communicate this with key stakeholders. For further reading, please see the “Decoupling” section of Celia Dallas and Wade O’Brien’s “VantagePoint:…

Decades of Data: 1900–2019

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As the current market environment continues to rapidly evolve, we remind investors that reviewing the history of business cycles, returns, and valuations can help provide a framework for understanding the market today. Our 2019 edition of Decades of Data presents historical analysis on economic indicators, equity, fixed income, and cash markets across eight geographies over the very long term.