bfinance sees ‘fundamental shifts’ in Chinese equity offerings

first_imgBorder to Coast Pensions Partnership, one of eight asset pools created by UK local government pension schemes, recently revealed it was looking to establish a dedicated allocation to Chinese equities.“Right now, the most noticeable changes are taking place in the All-Shares space”Weichen Ding, senior associate at bfinanceWeichen Ding, senior associate at bfinance, said: “More investors are beginning to take a strategic approach, as one might traditionally do with markets such as Japan, Europe and the US.”He added that investors currently examining this space “will encounter a landscape of products and strategies that has changed a great deal during the last five years”.He continued: “Right now, the most noticeable changes are taking place in the All-Shares space – there are still fewer than 20 strategies, but more than 30 managers are able and willing to offer this strategy to prospective clients, for example, by combining existing onshore and China offshore capability together.”In its report, bfinance noted that the universe of nascent and potential All-Shares strategies opened the door to “very attractive pricing”. Clients willing to seed new strategies could obtain fees of 30-55bps or even lower, it said.‘Outstanding performance’According to bfinance, the market turmoil of 2020 has “showcased diversification”, with a clear divergence between Chinese equities and global emerging markets in the first quarter. While the MSCI EM index lost 23.6%, the MSCI China A index lost just 9.72% and the MSCI China index (largely offshore) lost 10.22%, it said.According to its report, active managers have demonstrated “outstanding alpha generation”, particularly in onshore markets – the average A-Shares manager delivered 5.3% per year over the last five years versus -6.2% for the MSCI A-Shares index.Kristjan Mee, research and analytics strategist at Schroders, said that as the initial epicentre of the coronavirus outbreak back in January, China has also been the first country to ease lockdowns and other containment measures.“As a result, Chinese stocks have held up better than most other global equity markets on a year-to-date basis; and this has spurred investors’ interest in China equities,” he explained.He warned, however, that an investment strategy should not be based on short-term developments, especially as the ultimate effects of the coronavirus crisis are still unclear.“That being said, there are good reasons why Chinese equities, specifically the mainland markets of Shanghai and Shenzhen, offer attractive opportunities to investors looking to strategically position their portfolios for better times,” he added. Investors are re-assessing their approach to investing in Chinese equities, supported by fundamental shifts in asset management offerings, consultancy bfinance has said. In a report, it said an ongoing re-evaluation of investment strategy was called for by the growth of China’s equity markets, both in terms of global index weightings and overall market capitalisation.While four in five investors still obtained their China equity exposure solely through global emerging market (GEM) equity strategies, bfinance clients were increasingly using dedicated China equity strategies.This could be by adding A-Shares for onshore equity exposure alongside GEM strategies, the latter being primarily focused on offshore securities, or carving out all Chinese equity exposure to be managed through China ‘All-Shares’ strategies, which blend onshore and offshore together.last_img

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