(Yicai Global) June 13 -- Investors should not withdraw from a market as big and sophisticated as China despite the latest headwinds in the mainland capital market, according to the chief global strategist of a US investment manager.
Christopher Smart answered Yicai Global's questions about opportunities in the Chinese market. Charlotte-headquartered Barings had nearly USD400 billion in assets under management as of Dec. 31, 2021. The following is the interview transcript.
YG: As an investor, where is the opportunity in China?
Smart: I think we do not have to get too caught up on short-term headwinds. The Chinese economy is still growing, and also still rebalancing. Companies that are able to focus on the rising levels of income among Chinese households, companies that are able to focus on providing more services to those households, and a broader technological transformation that China and other parts of the world are undergoing -- all of these things are good places to look.
YG: Some people say that foreign investors are losing faith in the Chinese market. Barings, as a leading asset management institute in the world, do you still have faith in this market?
Smart: I think we do. It’s hard to know what’s going to happen in the next couple of weeks or months, but China is an enormous market. I’m not sure if it’s exactly the right moment, but you should never give up on a market, particularly a market as broad and as sophisticated as the Chinese market.
Corrections in the Chinese equity market since January don't scare us. We are also hoping to be able to offer more expertise. We have an office in Shanghai with expertise of the Chinese market for international clients and partners.
YG: Will what is happening in Shanghai impact your future expansion plan here?
Smart: I don’t think so. The pandemic is not a part of doing business. But we have an extraordinary team so that we are able to continue to manage our products without any interruptions.
YG: It has not been a good year for mainland investors this year. Someone said that A-shares appear to be nearing the late stages of a bear market, but the final leg will be very volatile. Are you ready to enter the market?
Smart: I think it’s always hard to know when a market is going to hit bottom. It has been a dramatic selloff in China, and it has been a dramatic selloff in the US as well. We try to focus on the longer term. In the next few weeks or months, the market may continue to be bumpy as growth rates adjust, you just need to look for businesses that are going to do well with good balance sheets, good managements, and with a plan to get through the cycle and to overcome the headwinds in the cycle.
The financial expert also expressed his opinion on inflation in the United States.
A rising set of interest rates is going to cool US consumer demand, according to Smart. The bigger question is where inflation stops and whether it will return to below 2 percent, a level seen before the pandemic.
The executive added that he believes that the US will have lower inflation this year.
With the Federal Reserve’s tightening policies, the economy is slowing but not stopping. There could be a recession in the US, but more data would be required to predict that, he concluded.
Editor: Emmi Laine, Xiao Yi