Finding stability amid volatility

Gian Plebani explains why China multi-asset can help
investors capture China's growth story in a risk-aware way

Gian Plebani, Portfolio Manager, Investment Solutions, has spotted a turning point in China's economy. 

He has seen leading economic indicators, like credit creation and real economic activity, turn positive during the past couple of months.

That means an improving macro picture for China's economy and Plebani is positive on the outlook given the Chinese government's willingness and ability to provide additional stimulus.

Temporary trade truce but volatility might continue

But uncertainties do remain.

Although G20 meetings with Xi and Trump showed goodwill to resume negotiations, the latest talks delivered no definite timeline and that means volatility might continue.

A good buying opportunity for multi-asset, risk-aware China strategies

Plebani believes investors could consider a strategy, like a multi-asset approach, that strives to combine the best of China's equity and fixed income markets and capture China's growth story in a comparatively stable and risk-aware approach.

And Plebani sees current market levels as a good buying opportunity, particularly for those investors who have taken profits from China equities but still want the China story albeit in a more stable exposure.

Overweight risk assets now and prepared for currency risks

Within Plebani's China Allocation Opportunity strategy, Plebani currently overweights risk assets with a preference for equities over bonds.

More specifically, Plebani has a preference for A-shares because domestic equity markets are comparatively sensitive to fiscal stimulus and the easing stance of the monetary policy. In fixed income, Plebani favors China High Yield.

As for the RMB, Plebani has hedged out some CNY exposure to protect the strategy from sharp currency depreciation should it go past the psychological USDCNY level of 7.

Capturing China but with a smoother ride for investors

Put together, an improving macro picture in China, plus policy support and an attractive buying opportunity means a compelling time to take a look at China multi-asset strategies. 

We'd say now is a good time to increase risk allocations to China through multi-asset strategy because we are now seeing the effects of the recent domestic stimulus improving the momentum of the most leading indicators.

Gian Plebani, Portfolio Manager, Investment Solutions

Hong Kong Retail Investors