Kevin Anderson, State Street Global Advisors
State Street projects China’s GDP growth to be at 7.9% in 2021 and 5% in 2022. Next year Beijing will provide more accommodative policy measures, Kevin Anderson, State Street Global Advisors’ (SSGA) head of investments Apac, told FSA.
In terms of its emerging market portfolio, State Street is underweighting China versus the rest of global emerging markets.
“However, China does play a relevant part in investors’ global equity and emerging market portfolios because of its strong diversification benefits and low correlations, ” Anderson said.
Investors who are investing in China in a more passive or index way, should be considering a more active approach to their management of their China exposure, he added.
Considering the evolution of regulatory policy and having the ability to be a more dynamic in that market, is important rather than having to own the whole index, according to Anderson.
“We still see that one of the risks on the global picture is geopolitical risk and the Sino-US strategic rivalry,” he said, adding that the sectors it is underweighting in China include the ones that are expose to the Sino-US strategic rivalry. It is also underweighting the “older economy”, such as the materials and the real-estate sectors, which are struggling with the tightened policy environment.
Strong consumer sectors
On the other hand, SSGA is overweighting three sectors: the consumer discretionary, the communication services and the financials.
Within consumer discretionary, Anderson likes electric cars, thanks to the fast adoption and solid expansion potential. He also likes component parts of electric cars, such as battery manufacturers.
“Since there has been a constant promotion of healthier living as well as the shift towards local brands from big global brands, local sportswear names are also worth considering,” he said.
Among the communication services sub-sectors, SSGA has some exposure to internet names, but that doesn’t include companies engaged in online gaming, e-commerce and others subject to antitrust or monopoly regulation.
In the financial sector, Anderson said that insurance and security exchanges have the potential to grow, as China is opening up its financial markets and these sectors will benefit both from domestic and international participants.
Comparison with India
Elsewhere in Asia, SSGA is overweighting India, despite valuations not being heap. “There is a lot of pent-up demand in the post Covid economy, and there has been an accumulation of savings,” he said.
“We think that sectors such as the automobile sector are going be in favour, as people are looking to buy new cars. We also like some commercial banks and mortgage lenders.”
Indeed, “there are greater opportunities for sustainable growth in those sectors in India compared with China,” according to Anderson.