PineBridge, Man Group bet on China as reopening hopes fuel markets
LONDON, Nov 4 (Reuters) - Asset manager PineBridge Investments' multi asset team has sharply raised its China equity exposure and rival Man Group expects to expand its presence in the country with expectations that strict COVID rules will be eased.
Chinese markets roared higher and the yuan rose on Friday, with about a trillion dollars added to the value of Chinese stocks in a week, as rumours and news reports fed hopes for twin relief in U.S.-China tension and China's tough COVID rules.
Hani Redha, global multi-asset portfolio manager at U.S. firm PineBridge, told Reuters on Friday the market moves, and indeed the fund's plans, were motivated by hopes of a reopening boosting the economy and Chinese assets.
"Europe is going into recession now, the U.S., maybe, sometime next year, but China's already had a recession ... The next leg is up for Chinese equities, it's a question of when, and the main driver would be the reopening," Redha said.
"As a result, we have increased our exposure to higher levels in anticipation of this improvement ahead.”
The asset manager has $133.4 billion in assets under management, of which $28.9 billion is in global equities and $17.2 billion in the multi asset strategy that is currently underweight in European and U.S. stocks and overweight China.
China's economy rebounded faster than anticipated in the third quarter though the revival was challenged by COVID-19 curbs, a prolonged property slump and global recession risks.
While there has been no official word on changes to China's "dynamic-zero" COVID policy, a former Chinese disease control official told a conference hosted by investment bank Citi that substantial changes are set to take place soon.
Bloomberg News reported on Friday that China was working towards relaxing rules. However, a foreign ministry spokesman later said he was not aware of the report, calling China's COVID policies consistent and clear.
Nonetheless, the Hang Seng (.HSI) index bounced from last week's almost 13-year low, while the Shanghai Composite (.SSEC) rose from a six-month low hit on Monday.
Redha said his team expected the restrictions to be lifted after the 14th National People's Congress that is scheduled to convene in March 2023.
ASSET MANAGERS IN CHINA
UK fund manager Man Group Plc (EMG.L), which has $138.4 billion in assets under management, is planning to expand its presence in China - including bets on local equities - once the curbs are eased, CEO Luke Ellis said on Thursday.
In contrast, many other foreign funds have sought to exit China in recent months, mainly on concerns that President Xi Jinping could extend COVID policies and private sector crackdowns during his third term.
Tiger Global Management is among those reassessing exposure to the country, pausing investments in Chinese equities, after Xi cemented his grip on power, the Wall Street Journal reported on Thursday.
Net selling of Chinese equities by international active funds totalled around $30 billion over the past year and global hedge fund allocations in Chinese equities have declined from 15% at the 2020 peak to 8% now, Goldman Sachs estimates.
JPMorgan meanwhile estimates that over the course of nearly a decade of gradual capital account opening, foreign investors increased holdings of Chinese onshore equities to around $530 billion, or about 11% of the free float, although this has since fallen to $370 billion taking into account price changes and outflows since end-June.
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