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BlackRock Returns to China Equities Despite Rout

World’s biggest money manager says precipitous drop in China stocks this year is overdone and is ready to “dip its toes” back into the market


People are seen in front of a showroom that hosts BlackRock in Davos, Switzerland. Photo: Reuters

 

BlackRock has said it is “dipping its toes” back into Chinese equity markets following their heavy falls this year, and on bets that Beijing will soon resume stimulus.

Some of China’s biggest stocks are on course for their worst quarter on record following regulatory clampdowns that have hammered super-sized tech firms and education providers, and turmoil now engulfing property giant Evergrande.

“We are dipping a toe in Chinese equities by moving our tactical view from neutral at midyear to a modest overweight,” BlackRock‘s ‘Investment Institute’ strategists said in a weekly note first published on Monday.

“This call is partly rooted in our expectation for incremental near-term easing via three policy levers – monetary, fiscal and regulatory – with growth slowdown likely having reached a level that policy makers cannot ignore.”

 

Stocks Decline ‘Overdone’

The world’s largest asset manager added that China’s economic growth rate was likely to drop to around 3% in the final three months of the year from a stellar 18% in the first quarter.

However, the more than 30 percentage-point underperformance of Chinese equities versus US stocks this year was “overdone,” especially with a six-to-12-month horizon.

It also said the amount of Chinese assets held by clients at the moment was effectively too small considering the growing clout around the world held by Chinese financial markets.

“Currently very small client allocations to Chinese assets would imply a view that China will become essentially un-investable,” BlackRock said, adding it had also gone modestly “overweight” on emerging market local currency debt.

 

• Reuters with additional editing by Mark McCord

 

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Mark McCord

Mark McCord is a financial journalist with more than three decades experience writing and editing at global news wires including Bloomberg and AFP, as well as daily newspapers in Hong Kong, Sydney and Melbourne. He has covered some of the biggest breaking news events in recent years including the Enron scandal, the New York terrorist attacks and the Iraq War. He is based in the UK. You can tweet to Mark at @MarkMcC64371550.

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