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Investing in Chinese stocks amid geopolitical tensions



Singapore-An investment strategist said that as “geopolitical diversification” will become a more critical consideration in the next few years, investors need to allocate more investment portfolios to China.

Paul Colwell, head of the Asian consulting business at Willis Towers Watson, an insurance brokerage firm, said that currently, global investors’ investment in China is less than 5%.

Willis Towers Watson (Willis Towers Watson) report cited the latest survey results of data analysis company Greenwich Associates, showing that pension funds and endowment funds in China̵

7;s allocation ratio between 3% to 5%.

According to data from the index provider, as of August 2020, the weight of China A shares (or stocks traded on the mainland) is 5.1% of the MSCI Emerging Market Index.

In an interview with CNBC’s Squawk Box Asia on Monday, Colewell said: “We just don’t think we are adequately prepared for the new world order.” He added that in the next ten years, they should be The distribution ratio increased to 20%.

Colwell said: “In order for investors to properly adapt to the future post-Covid world, they need to allocate more investment portfolios to China in the new world order.” “Geopolitical diversification will become a more important portfolio… …To consider in the next few years.”

If you think that the world is moving away from globalization, if you believe that the world’s major economies, especially the United States and China, will be separated from each other, then we believe that there are good reasons to allocate it to China.

Paul Cowell

Head of Asia Consulting Business Department, Willis Towers Watson

Since the beginning of this year, China has been involved in trade disputes with the United States, Europe, Australia and India.

Since 2018, Beijing has been in a trade dispute with the United States, and finally reached a “phase one” trade agreement earlier this year. However, as Washington increasingly targets Chinese technology giants, from mobile phone maker Huawei to video-sharing app TikTok, tensions continue to escalate and shift to the field of technology.

In recent months, tensions between China and Australia have also increased. After Canberra called for a global investigation into the origin of the coronavirus.

The move has angered Beijing, which has imposed trade restrictions on Australian imports-the latest is the 212% anti-dumping tariff on Australian bottled wine imports, which China announced late last Friday.

Regarding trade tensions, Colewell told CNBC that they would only make “a lot of noise” and short-term market fluctuations.

However, he said: “If you believe that the world is moving away from globalization, if you believe that the major economies in the world, especially the United States and China, will be separated from each other, then we believe that there are good reasons to allocate China, even exceeding your expectations. .”

Colwell added: “The correlation between China’s A-share market and developed markets is relatively low. Driven by different methods of monetary policy and economic policy, the operating frequency of the Chinese economy is fundamentally different from other major regions.”

He said that, therefore, allocating to Chinese stocks will enhance the “flexibility and robustness” of the global investment portfolio.


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