Raymond Chan, AllianzGI
Given the macro environment, global equities will continue to underperform for the rest of the year as interest rates are unlikely to come down dramatically in this time, said Raymond Chan, chief investment officer, equity, Asia Pacific at AllianzGI, in an exclusive interview with FSA.
Nonetheless, he believes there are opportunities in the Chinese market.
“In particular, the Chinese market may perform better than the global markets due to the divergent cycle. There is tightening in the US, but in China, we are seeing an expansionary cycle through interest rate cuts, triple R and fiscal expansion,” said Chan.
“So, if global markets underperform, the Chinese market may underperform less.”
He also noted that global investors are now less exposed to Asia, and some individuals have claimed the China market is “not investable”.
Therefore, he believes that Asian markets are trading on attractive valuations due to earlier sell-offs. As a result, it creates a good entry point for investors to position themselves for a potential US dollar weakening.
Chinese internet stocks
After a sweeping technology clamp down around 18 months ago, AllianzGI is seeing a rebound in China’s internet sector.
“We have seen Chinese authorities being less aggressive starting from the beginning of this year,” said Chan.
“We still believe internet giants make a big contribution to the country, and starting this year, we are seeing internet companies shift their focus to cost cutting.”
The asset manager expects a surprise in internet companies’ earnings due to positive impacts from cost-cutting measures.
Property hopes
Into the second half this year, AllianzGI expects to see further consolidation in the property market but believes the sector is seeing light at the end of the tunnel, with expected better contracted sales.
“We prefer state-owned names because they have easier access to capital and bank financing, while the private ones cannot get financing,” said Chan.
Energy sector
Meanwhile, energy prices have recently come down on concerns of a US recession, but AllianzGI believes prices will strengthen again.
“Over the last few years, energy companies have not been investing because the oil industry is carbon intensive, while the planet needs more green energy,” Chan said.
“But assuming Covid is under control, the China market is going to perform next year and the demand for oil and oil-related sectors will hike.”
With potentially increasing demand, Chan favours oil and energy names in Australia and other Asean countries such as Indonesia, Thailand and Malaysia, since these are likely to benefit from higher commodities and energy prices.
On the other hand, India is in a disadvantaged position because it has to import oil and therefore runs a big current account deficit, Chan added.
