BlackRock calls on investors to increase their allocation to the Chinese market


Update on Sino-U.S. Relations

BlackRock’s research department stated that China should no longer be seen as an emerging market and suggested that investors increase their exposure to the country by as much as three times.

The internal think tank of the New York-based investment company said that as the scale and complexity of China’s capital market flourish, the allocation of Chinese stocks and debt will increase.

Li Wei, chief investment strategist at BlackRock Investment Institute (BII), said in an interview: “China is underrepresented in the portfolio of global investors, but in our opinion, it is also the same in global benchmark indexes.” “It has the second largest stock market and the second largest bond market. It should be more reflected in the investment portfolio.”

The bullish call was made during a period of turbulence in the Chinese market. In dollar terms, the country’s CSI 300 stock barometer has fallen 4% this year, seriously lagging behind the 14% gain of the Morgan Stanley Capital International Global Index. Regulatory crackdowns have caused even greater declines in Chinese companies listed in Hong Kong and other international markets.

The BII’s proposed allocation of Chinese assets is now “two to three times” the diversified global investment portfolio, such as the MSCI Global Index. China is currently the third largest constituent stock with a weight of 4.2%. Prior to the mid-year review in July, the proposed allocation was consistent with the main index. BII’s recommendation indicates that it should be close to 10%, ahead of Japan, but still far below the United States.

Li Wei, chief investment strategist at BlackRock Investment Research Institute, said that China is “underrepresented in the portfolio of global investors”.

Regarding Chinese bonds, Li said that “in certain investor situations” the benchmark weight should be “a little more” than two to three times that of stocks.

“The starting point is too low. The development direction that China represents in the global benchmark is clear,” Li added.

The advice of the world’s largest asset management company, which manages $9 trillion in assets, is Increased tensions Between the United States and China. Politicians in Washington and Beijing have both raised objections to the listing of Chinese companies in New York, reflecting the widening financial divide.

“The spheres of influence between the two superpowers are separating. In the short term, this may cause market volatility. In the long run, if you want to enter China, you have to go to China,” Li said.

BII in its Mid-year outlook An article published in July stated that now is “time for treatment” [China] As an investment destination independent of emerging and developed markets. The Chinese economy has withstood the impact of Covid-19 and is stronger than its global counterparts, just like after the global financial crisis. “

Its proposal came as BlackRock and other large asset management companies sought to establish operations in this huge country.BlackRock won earlier this year First approved Foreign asset management companies carry out wholly-owned mutual fund business in China.

Investors in Chinese assets have experienced a bumpy year, and the government’s suppression of some private sectors has caused a stir.

$100 billion company Coaching The industry has been banned from making profits, receiving foreign investment and listing on foreign stock exchanges, and the market value of the three major U.S. listed companies has shrunk by 90%.

Since then, the proposed listing of fintech platforms has been blocked Ant Group And surveys on taxi-hailing applications Didi Chuxing, Which caused it to be removed from the domestic app store a few days after becoming the largest Chinese company since Alibaba in 2014 went public in the United States.

“Think of this journey as a half-step forward,” said Li, who believes that Chinese assets will bring “greater long-term returns” and diversified benefits, even if they bring “greater uncertainty.” .

“This is not about eliminating risk, but whether you are rewarded for risk? We believe we are being compensated.”

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