CIO Office Viewpoint – 03.04.2024: How to trade your dragon

By John Woods, CIO APAC and Michael Strobaek, Global CIO

Key takeaways

• China’s policy priorities have eclipsed markets, leading to net outflows as the world’s second-largest economy is too big to ignore, but too uncertain to inspire investor confidence
• We removed strategic allocations to Chinese debt and equities in late 2023. Tactically, it is still too early to take a positive view on direct investments into Chinese stocks, bonds, or the yuan
• However, we see tactical alternatives to direct China exposures that can contribute to returns in a globally balanced portfolio
• Proxies include Europe’s luxury goods makers, and equities in South Korea and Taiwan, which are economically correlated with China. Beneficiaries of ‘friend shoring,’ including India and Mexico, may also gain from new capital and technology flows.