Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

What the top guns are saying about 'China' right now

Trade talks between Xi Jinping and Donald Trump is expected to take center stage at the G20 summit in Osaka - and this is what top investment specialists had to say

César Pérez Ruiz, Pictet Wealth Management
Head of investments and CIO

High on the anticipation list is the G20 summit in Osaka, where the US and Chinese presidents are expected to meet for trade discussions on the sidelines this week.

Given the history of their discourse, the only thing that seems sure is that the outcome could fall anywhere on the spectrum from game-changingly negative to positive where it comes to trade and the global economy.

We like Chinese domestic assets for this reason regardless of what happens with trade, they should benefit from the Chinese government’s committed stimulus measures. More frighteningly, if Trump continues to play with fire with Iran, we can expect continued energy and gold price appreciation.

César Pérez Ruiz, Pictet Wealth Management
Head of investments and CIO

High on the anticipation list is the G20 summit in Osaka, where the US and Chinese presidents are expected to meet for trade discussions on the sidelines this week.

Given the history of their discourse, the only thing that seems sure is that the outcome could fall anywhere on the spectrum from game-changingly negative to positive where it comes to trade and the global economy.

We like Chinese domestic assets for this reason regardless of what happens with trade, they should benefit from the Chinese government’s committed stimulus measures. More frighteningly, if Trump continues to play with fire with Iran, we can expect continued energy and gold price appreciation.

Anthony Raza, UOB Asset Management
Head of multi-asset Strategy

China’s economy has slowed with a drop in manufacturing activity and corporate earnings. The US embargo on Chinese companies such as Huawei and consequent retaliation by China also threatens to exacerbate the slowdown.

While the Chinese government has implemented fiscal and monetary easing measures, we think they can only have a limited offsetting effect.

We think that any prospects of the US-China trade resolution look dim in the near-term. We are aware of the downside risks and have switched to a defensive portfolio positioning in an absence of any clear catalysts. As such, we are underweight on Chinese equities and the Reminbi.

Andrew Balls, PIMCO
CIO global fixed income

As the Chinese economy rebalances away from exports and investment to consumption and opens up to capital inflows, the current account will likely move from surplus into deficit.  

The path of the Chinese yuan has been a key source of risk for global markets over the past three to five years and is likely to remain so over the next three to five years.

China’s growing economic power and its ambition to establish a global sphere of influence could disrupt the established geopolitical order dominated by the US. And irrespective of the outcome of the current trade conflict, is likely to lead to continuing economic and political tensions between the US and China in the coming years.

 

Tuan Huynh, Deutsche Bank Wealth Management
CIO emerging markets

We don’t expect a complete solution to the US-China trade war from the G20 meeting. It would be too optimistic at this stage. Our base case is that US and China could restart negotiation at the meeting.

The meeting could help ease the bilateral relations and to move the current conflict in the direction of an eventual agreement.  We believe the key areas of US-China negotiation are in intellectual property rights protection, SOE subsidies and agricultural. 

Thomas Poullaouec, T. Rowe Price
Head of multi-asset solutions, Asia Pacific

Market sentiment on China has rapidly shifted, with expectations having been lifted from dismal levels. As such, our positioning is more balanced today towards Chinese assets than our earlier constructive view.

We still hold an overweight towards emerging market (EM) stocks due to attractive relative valuations and expectations of a softer US dollar, but this was trimmed because of current uncertainties.

Should we get a trade deal – not our base case – or further stimulus in China – which is likely – we could turn more positive on EM and Chinese assets.

David Chao, Invesco
Global market strategist, Asia Pacific

Although Chinese risk assets may experience some near-term market volatility due to the impact of the trade war, the longer-term economic growth drivers are still in-tact.

Beijing has many tools to use, such as lowering interest rates, cutting the reserve requirements for banks and fiscal stimulus to increase consumption. We expect China’s economy continues to be on-track hitting government GDP targets of 6.0-6.5% for 2019.

Qian Wang, Vanguard
Chief economist, Asia Pacific

China’s currency hit its weakest level of 2019 against the US dollar last week, near a 7.0 level that has become symbolic in the context of US-China trade. Vanguard believes the yuan will continue to experience downward pressure, or modest depreciation, in the near term.

But we expect that the People’s Bank of China (PBoC), China’s central bank, will protect the yuan against any substantial exchange rate movements.

The PBoC is aiming to balance the risks of a modest depreciation, which can increase the competitiveness of Chinese exports and offset the effect of tariffs, with further sharp depreciation that could trigger large-scale capital outflows.

Kunjal Gala, Hermes Investment Management
Global emerging markets co-portfolio manager

We are more concerned about the long-term geopolitical implications of the Huawei ban. Since the blacklisting, there have been negative stock-price moves for companies throughout the Huawei supply chain, including some of our holdings.

However, the businesses we are invested in do not have significant exposures to Huawei, and they do not face heightened structural risk as we do not think a ban on Huawei by the US and its allies will stop the global rollout of 5G in its tracks.

Nevertheless, the Chinese equity sell-off caused by the Huawei ban has driven the market’s price-to-earnings multiple down to its long-term average of about 11x, providing valuation opportunities.