LONDON : PineBridge Investments has increased its exposure to Chinese equities to a record high on hopes China’s strict COVID restrictions will be lifted and boost the market, the U.S. asset manager told Reuters on Friday.
Chinese markets soared and the yuan rose on Friday, with about a trillion dollars added to the value of Chinese stocks in a week, as rumours and news reports fed hopes for twin relief in U.S.-China tension and China’s tough COVID rules.
“We have more China equities that we’ve probably ever had before in our portfolio in anticipation of this improvement ahead,” said Hani Redha, global multi-asset portfolio manager at PineBridge.
The asset manager – which has $133.4 billion in asset under management, of which $15 billion is in global equities – is currently underweight in European and U.S. stocks.
“Europe is going into recession now, the U.S., maybe, sometime next year, but China’s already had a recession … The next leg is up for Chinese equities, it’s a question of when, and the main driver would be the reopening,” Redha said.
China’s economy rebounded faster than anticipated in the third quarter, with a more robust revival challenged by persistent COVID-19 curbs, a prolonged property slump and global recession risks.
While there has been no official word on changes to China’s “dynamic-zero” COVID policy, a former Chinese disease control official told a conference hosted by investment bank Citi that substantial changes are set to take place soon,
Bloomberg News also reported on Friday that China was working towards relaxing rules. However, a foreign ministry spokesman later said he was not aware of the report and that China’s COVID policies were consistent and clear.
Nonetheless, the Hang Seng index bounced from an almost 13-year low touched last week, while the Shanghai Composite rose from a six-month low hit on Monday.
Redha said his team expected the restrictions to be lifted after the 14th National People’s Congress that is scheduled to convene in March 2023.
“But I’m not surprised that there will start to be increasing noise in the lead up to that and these equities can react because they’ve been hurt very badly,” he said.