News

Managers rush to reassure investors over China

Keep calmA flurry of fund manager commentary has sought to reassure investors by claiming the stock market rout described as "black Monday" was a short-term correction and not cause for panic.

The global fall in stock prices was triggered by a collapse in China's equity market – the Shanghai composite index fell 8.5% on Monday, having already fallen considerably in the previous month – as investors downgraded their estimates for economic growth in the world's most populous country.

"It seems that many market participants were counting on a decisive action by the Chinese central bank and are panicking at the idea that there might be no pilot in the Chinese plane," says Eric Chaney, head of research at Axa Investment Managers.

Many fund managers have criticised the Chinese authorities for recent interventions in the stock market, which they say have eroded investors' trust while at the same time failing to stabilise prices.

Nevertheless, some are hopeful that allowing Chinese pension funds managed by local governments to invest up to 30% of their assets in stocks and equity funds will buoy up the market. Lukas Daalder, chief investment officer for Robeco's Investment Solutions, says further steps may be needed, though.

"Even a new depreciation of the renminbi cannot be ruled out," he says.

Despite the need for more intervention, Daadler says the volatility in China is an opportunity to buy stocks at low valuations that will appreciate in the long term.

It is still unclear how much further the Chinese stock market has to fall, having lost nearly 8% of its value on Tuesday – almost as dramatic a decline as the previous day.

Guy Stephens of Rowan Dartington Signature summarised the views of many China sceptics when he said: "We have known for some time that ever since the credit crunch in the West hammered global demand for Chinese exports, the Chinese kept their growth miracle going through massive infrastructure spending projects which resulted in the construction of airports, roads, underground systems, whole cities and more."

He adds: "But there is only so much real estate, empty office blocks and under-utilised infrastructure you can build before eventually the misallocation of capital causes a pause so that demand can catch up."

©2015 funds globla asia

Executive Interviews

Executive interview: PGIM CEO on where the ESG flowers should bloom

Sep 27, 2021

David Hunt, president and chief executive of PGIM, tells Romil Patel about leading a top 10 global asset manager in times where “empowering and encouraging the kind of investment decisions as...

Executive interview: Nicolas Moreau’s orderly transition

Jul 12, 2021

Nicolas Moreau, CEO of HSBC Asset Management, is moving to Asia as the firm looks to connect more directly with the region’s growth story. ESG is also a key focus – including the ‘just’ carbon...

Roundtables

Roundtable: Singapore comes of age as an Asian ESG hub

Dec 01, 2021

Strong ESG credentials strengthen the case for Singapore as a leader in Asia of the post-Covid recovery. Our panel discusses the risks and opportunities.

Roundtable: How well geared are Japanese assets for a new world?

Jul 12, 2021

As we prepare to emerge from Covid, experts look at overcoming demographic issues through a combination of good tech and corporate governance, improving productivity and meeting an ambitious government carbon emissions reduction target. Chaired by Romil Patel.