With a significant downturn in sentiments, Julius Baer joins the camp of caution, noting that 2022 will be a year of consolidation rather than «big bets» for the Chinese market.
Foreign investors are increasingly taking a more cautious stance on the Chinese market with examples such as a major offloading of tech shares by hedge fund Hillhouse and, more recently, the announced suspension of new investments by Singapore’s Temasek.
Julius Baer’s Asia chief investment officer Bhaskar Laxminarayan said he expects this muted sentiment to extend through 2022.
«Chances are that people not going to make big bets on China. Foreign investors are still going to wait and watch in terms of how policymaking changes or how it’s going to adapt,» Laxminarayan said during a virtual media roundtable yesterday. «While the potential in China is undeniably there, from [the perspective of] increased exposure, 2022 will be a consolidation year or a review year.»
Real Estate Sector
Despite the increased caution, Laxminarayan underlined that there are still attractive investment opportunities in China including dollar bonds, renminbi assets and even the real estate sector.
«[The Chinese real estate sector] has been the poster child of negative policymaking […] for a long time. It’s not new,» he said. «I would encourage people to look more closely at the property market. I’m not saying you can buy everything but if you do your homework, this can be a very profitable place to look for opportunities.»
Selective Opportunities
From a broader perspective, Julius Baer advises clients to stay invested and maintain exposure to risk assets via equities.
Within the asset class, the bank is bullish on developed markets led by the U.S. with defensive stocks preferred over cyclicals in 2022. And within fixed income, it is positive on selective opportunities in U.S. Treasuries and dollar-denominated corporate credit.
