Fund selectors in Asia see China’s economic woes as a far greater threat than their peers in other regions.
That was just one of the findings from Natixis Investment Managers’ 2024 fund selector outlook survey, which canvassed the views of 500 respondents in 26 countries globally.
Given China’s stuttering reopening from lockdown last year and the ongoing problems in the property sector, typified by the liquidation of China Evergrande Group, few fund selectors currently reckon it makes sense to increase their exposure there.
At just 15%, China ranks lowest among the emerging market regions where fund selectors see the best opportunities compared with 48% for Asia ex-China.
Moreover, it is only in Asia that fund selectors single out China as a major risk, with 42% ranking it as their top concern compared with 21% globally.
This was the second top concern cited by fund selectors in Asia after war and terrorism, which came in at 55%.
In Asia, fund selectors were also more likely than those in other regions to forecast rate cuts this year at 71% compared with 54% globally.
This reflects the fact that many emerging markets face a more benign inflationary environment than their developed market peers, leaving more headroom to begin cutting interest rates.
Asset allocation
Overall, while economic concerns abound, few fund selectors expect to make major shifts in allocation strategy and instead favour extending duration in fixed income and large-cap stocks when it comes to equities.
In Asia, fund selectors were more likely than their global peers to say that they have already begun extending duration at 37% compared with 24% globally.
When it comes to equities, fund selectors mostly favour defensive sectors such as healthcare and consumer staples as well as those that thrive during higher interest rates such as financials.
The major exception to this is technology, for which half of fund selectors said they expect the sector to outperform this year.
Fund selectors in Asia appear to be particularly bullish about the prospects for tech, with 66% stating that they reckon it represents a bigger opportunity than the internet compared with 47% globally.
In terms of private markets, fund selectors in Asia are particularly bullish on private credit, with 46% stating that they plan to increase their holdings compared with 38% globally.
