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Axa IM trusts in China’s structural themes

Axa Investment Managers (IM) believes the recent regulatory actions will not overshadow the long-term growth opportunities in Chinese equities.
Natalia Mu, Axa Investment Managers

The crackdown on China’s tech and private education sectors have caused nervous foreign investors to retreat, but regulatory risk in China is not new, Natalia Mu, equity investment specialist at Axa IM, told FSA.

“It has come and gone in the past,” she said. “We’ve seen regulation that was applied to the gaming sector, and earlier regulatory measures directed at the private education sector”.

But, long- term investors who understand the Chinese market, know that the country still offers superior growth opportunities, she said.

“Our investment approach is very much bottom up and stock driven; we don’t have a top-down allocation at all,” said Mu. “Following the recent market falls, some very high-quality names still look attractive.”

There are five key themes in Mu’s investment strategies: population aging and lifestyle, transitioning societies, connected consumers (technologies that enable businesses to engage with consumers more deeply), automation, and clean tech.

In fact, regulatory action can support these themes, said Mu. Perhaps most obviously are measures to encourage the clean or green energy industries as China moves towards its target of carbon neutrality by 2060.

Meanwhile, Axa IM also has a strong bias towards the digital tech sector, where it identified growth opportunities well before the Covid-19 pandemic highlighted the importance of online trends both at home and in the workplace.

“Some companies were already enabling companies to work flexibly, particularly by giving them access to the cloud. But, the pandemic really accelerated the digital trend in 2020 as more and more people were forced to work and shop remotely,” she said.

Companies will continue to invest in software and the cloud to make their businesses more efficient and flexible, both for their staff and their customers, according to Mu.

“The pandemic was challenging in many ways, but some of our strategies benefited from it,” Mu said.

Axa IM, part of the Axa insurance group, manages about $1trn of assets worldwide. The firm’s confidence in China equities seems to be complemented by its physical commitment to Hong Kong.

“Hong Kong will remain an international asset management centre, and Axa IM engages with a lot of investors who are based in the [territory],” said Mu.

“There is no reason for a shift in the city’s status as a financial centre. When people can travel again, Hong Kong will continue to be the hub where clients and investors meet.”  

Part of the Mark Allen Group.