June 25, 2024

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Pimco, JPMorgan Are Gearing Up for Long Winter in China Markets

2 min read

(Bloomberg) — This was supposed to be the year that China’s economy roared back to life and, in the process, turned the country’s stocks and bonds into must-buys for global investors once again.

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Ten months in, the reality is far different. Chinese stocks are among the world’s worst performers, investors are yanking money out of the country at the fastest pace since 2015, and the yuan is hovering around a 16-year low as a real estate crisis ripples through the economy and offsets the momentum gained from the long-awaited pandemic reopening.

The selloff has caught even the most-seasoned investors off guard, forcing them to retool their approach to fit Beijing’s new economic model. Policymakers are no longer pursuing growth at all costs and have little appetite for bailing out ailing property developers; crackdowns have doused entrepreneurial spirit; and the country’s rift with Western nations shows few signs of easing.

Investing in China has never been easy, of course, but money managers now face layers of added complexity that require deft maneuvering. Here’s how some of the biggest investors, along with noted China watchers, are navigating the changed landscape.

Justin Thomson, T. Rowe Price

The chief investment officer for international equities believes “best investments are made just as you’re feeling most uncomfortable” — a principle he applies to Chinese markets.

While some clients are asking to exclude China from their portfolios due to geopolitical, macro, and regulatory risks, “this negative sentiment provides a contrarian investment opportunity,” he said in an interview.

“The issues surrounding the Chinese property sector are structural not cyclical and will cast a long shadow over the economy, meaning growth rates will be lower than previous decades,” he said. Still, “investors should not make the mistake of conflating economic growth with equity market returns.”

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2023-11-04 20:00:00

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