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Dalio says foreign portfolios should target 15%China holdings

Hedge fund boss Ray Dalio speaks in a TV interview. File photo by AFP.

(ATF) Ray Dalio, the founder of Bridgewater Associates, says foreign portfolio holdings of Chinese stocks and bonds should be close to 15% on a neutral weighting, rather than the current level of less than 3%.

Dalio, the opinionated American investor who built Bridgewater into the world’s biggest hedge fund with assets of around $140 billion, was writing in an op-ed article for the Financial Times.

“China’s fundamentals are strong, its assets relatively attractively priced, and the world is underweight Chinese stocks and bonds,” he said.

Dalio speculated that anti-China bias was blinding some foreign investors to opportunities. 

“I think it is about to change. Chinese markets are opening up to foreigners, who can now access at least 60% of them, compared with 1% in 2015. Benchmark weights in major indices are rising. As a result, I expect China to enjoy favourable capital inflows that will support the currency, already at a two-year high, and financial markets too,” he said.

Like other US investors, Dalio has been struck by the growing share of Chinese companies in the global market for initial public offerings (IPOs), and especially the IPO of Ant Group that is currently underway.

Ant listing enthusiasm

Jack Ma’s Ant Group is set to raise around $34 billion after the pricing for its dual listing in Hong Kong and Shanghai was set on Monday. 

This will make it the biggest IPO in history, surpassing the $29 billion stake sale in Saudi Aramco that was completed last year. It will also give Ant Group a similar market value to JPMorgan, the biggest US bank. 

Ant’s indicated value will be around $313 billion, rising to roughly $320 billion if underwriters exercise a ‘green shoe’ option to sell further shares.

The enthusiasm for the Ant IPO was in sharp contrast to the sell-off in European and US share prices that was seen later in the week on fears of the effect of rising Covid-19 cases on major economies.

The S&P 500 index slumped by 3.5% on Wednesday and the STOXX Europe 600 index fell by a comparable 3%. 

Bridgewater, the hedge fund that Dalio founded on a campus in Stamford, Connecticut, is controversial for its management practices, including a policy of “radical transparency” between employees.

Dalio regularly updates his principles of investing and writes unusually detailed essays on economic history that include his take on the implications for investing.

‘Changing world order’

He is currently producing a study called “The changing world order” in a series of online chapters that will also be published as a book. The two most recent chapters are on China, with the latest going online in late September and covering the current conflict in US and Chinese relations.

This includes themes that Dalio revisits in his current article on the reasons why foreign investors should increase their exposure to Chinese assets.

“There is a lot to potential for Chinese capital markets, the RMB and RMB-denominated debt to grow in importance because it is so under-invested in relative to its fundamentals,” Dalio said.


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Jon Macaskill

Jon Macaskill has over 25 years experience covering financial markets from New York and London. He won the State Street press award for 'Best Editorial Comment' in 2016


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