The Daily Update: China Joint Venture?

Earlier this week, BlackRock’s research unit stated that China should no longer be thought of as an emerging market and recommended that investors boost their exposure to the country by as much as 300%. In its mid-year outlook, Blackrock believed it was ‘time to treat China as an investment destination separate from emerging and developed markets. China’s economy has come through the COVID-19 shock stronger than global peers, just as it did after the global financial crisis’. Wei Li, the chief investment strategist of the world’s largest asset manager said that ‘China is under-represented in global investors’ portfolios but also, in our view, in global benchmarks’ adding ‘It has the second-largest equity market, the second-largest bond market. It should be represented more in portfolios’. A view you will know we 100% agree with here at SSC.

Li acknowledges that at the moment relationships between the US and China are not the greatest, however she believes that although ‘The spheres of influence between the two superpowers are moving apart. In the near term that can lead to market volatility. In the longer term, if you want to get China you have to go to China’. Li argues that China will deliver ‘greater long-term returns’ but one should think of the journey as ‘as one step forward, half a step back’. However, ultimately ‘It’s not about eliminating the risks, it’s about are you being rewarded for the risks? We believe we are being compensated’.

Everyone I’m sure is well aware that here at SSC we have been beating the China drum hard and loud for many years now. Should we have a chat with Blackrock, seeing as our views on China are so aligned? Maybe a joint venture offering our award-winning Renminbi Bond Fund, launched in 2007, which has produced an annualised return of 8.66% would be of interest?

(Class A USD since inception as at 31 July 2021.)