The four-year low that the Shanghai Composite index reached in June marked a bottom for Chinese shares and the rally will continue, said Raymond Chan, Allianz Global Investors’ chief investment officer for Asia Pacific.
“I don’t see much downside” in Chinese stocks, Chan, who helps manage $409 billion at Allianz, said in an interview at Bloomberg’s headquarters in New York yesterday. “China can continue to deliver the growth, maybe a slower growth, but it’s not going to crash.”
The Shanghai stock benchmark has rallied 15 percent since June 27 to a three-month high, while the Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. surged to the highest level in 16 months yesterday in New York. Government data this past week from exports to industrial output for August exceeded economist estimates, signaling a recovery in the world’s second-largest economy.
Allianz is “significantly overweight” in Chinese equities, portfolio manager Kunal Ghosh said in the interview. The company favors China’s consumer-driven sectors including tourism, automobile, gaming in Macau, Internet, and new energy, as the country shifts from an export-led economy to one focused on domestic consumption, Chan said.
Among emerging markets, Allianz is also overweight in northern Asian countries such as South Korea, as well as Singapore and Taiwan. “They all have the same good problem, which is the current-account surplus. That’s giving them a lot of cushion,” Ghosh said.
Allianz has increased holdings in Indian exporters that benefit from a weakening rupee, even if its economy is grappling with a decline in foreign investment inflows and rising oil prices, according to Ghosh. “The primary reason of the purchase was the demand from the U.S. The rupee depreciation is working as a tailwind,” he said.