China Forum 2020

Amid the fog of investor uncertainty coming from COVID-19, US-China tensions, and the US presidential race, our team of China experts Bin Shi, Hayden Briscoe, and Gian Plebani gave their views and expectations on the China investing outlook by asset class in a livestreamed conference in Hong Kong.

“We expect many more high-quality companies coming from a wide range of sectors in China's markets.”

Bin Shi, Head of China Equities

“2020 was a game changer for global bond markets. China fixed income has an excellent case from yield and capital appreciation perspectives.”

Hayden Briscoe, Head of Fixed Income, Asia-Pacific

“China's economy has seen a strong V-shaped recovery.”

Gian Plebani, Portfolio Manager, Investment Solutions

China Forum 2020 - in a nutshell

  • China's economy has seen a surprisingly strong V-shaped economy;
  • China high-yield bonds currently offer strong potential risk-adjusted returns currently;
  • China onshore fixed income offers an attractive return/risk profile compared to most global markets and CIOs should be rethinking their asset allocations;
  • China has done a good job of containing the COVID-19 virus, the outbreak has accelerated a series of investible trends like consolidation within industries; the shift from offline to online across business segments; and increased investment in Research & Development and innovation;
  • We remain constructive on China equities as long-term structural changes remain intact; markets are buoyant but long-term investors must stay disciplined

Equity

China equities continue to offer attractive return opportunities.

Bin Shi, Head of China Equities

China has done a good job of controlling the COVID-19 pandemic 

China has done a good job of controlling the COVID-19 pandemic, but the impact varies across different sectors.

We can see that the COVID-19 outbreak has accelerated a series of trends in China, such as: ongoing consolidation within many industries in China as smaller firms struggle; the shift from offline to online across business segments, including after-school tutoring, financial services, healthcare diagnosis; and investment in Research & Development and innovation, driven by growing demand for automated solutions.

Fixed income

China fixed income remains a stand-out
market

Hayden Briscoe, Head of Fixed Income, Asia-Pacific

2020 was a game changer for global bond markets

Through 2020, we have seen all major global bond markets become both more correlated and more volatile. For Hayden, this increased correlation means that the diversification benefit from holding government bonds is starting to subside. 

Hayden remarked that China fixed income remains a stand-out market, offering higher yields, lower correlation and lower volatility compared to major global bond markets.

Multi-asset

China’s strong V-shaped recovery had been evident in the real economy.

Gian Plebani, Portfolio Manager, Investment Solutions

Strong V-shaped recovery

China's economy has seen a surprisingly strong V-shaped recovery, which has been already been evident in the real economy.

Indicators such as fixed asset investment and industrial production have returned to trend levels seen before the COVID-19 outbreak, supported by infrastructure development. Real estate has also been a bright spot.

Fixed Asset Investment: Growth rate (% y/y 3mma), Jan 2012-Aug 20201

Source: UBS Asset Management, UBS IB, CEIC as of August 2020

Read more

Credit

Source: UBS Asset Management, UBS IB, CEIC, Wind as of August 2020

Read more

Setting the path for China investments

With COVID-19, US-China tensions and slower global growth fogging the way forward, how can investors navigate market trends and set their path for the future?