Blackrock expects near-term easing in China
Blackrock says slowdown has reached a level policymakers can’t ignore
Blackrock was out with a note on Monday saying they’re shifting to tactically overweight Chinese equities on easing expectations.
are dipping our toes in the asset class by shifting our view to a modest
overweight,” according to BlackRock’s ‘Investment Institute’ strategists, led by former BOC policymaker Jean Boivin and former SNB Chairman Philipp Hildebrand.
They note that Chinese equities have underperformed US peers by more than 30 percentage points this year and they believe the move is overdone, particularly over a 6-12 month horizon.
They highlight that investors currently have extremely small allocations towards China and indicate that ‘common prosperity’ fears are overdone.
Our strategic view already takes into account that China is unmistakably
on a path toward greater state involvement with social and political
objectives taking primacy over economic ones – leading to greater risks
and the need for a new investment lens. But context is everything: Our
allocations to Chinese assets remain orders of magnitude lower than
those to developed market assets.
Importantly, they now believe that easing is coming on multiple fronts in the near term. That’s something that could lead to a broader improvement in risk assets and commodities in particular.
This call is partly rooted in our expectation for incremental near-term
easing via three policy levers – monetary, fiscal and regulatory – with
growth slowdown likely having reached a level that policy makers cannot
ignore.