With the largest deal in China’s asset management industry done and dusted, Mackenzie Investments CEO Barry McInerney thinks investors should consider separate allocations to China.
McInerney says Chinese equity markets are mature enough for some investors to consider separate allocations.
Easier market access and risk diversification are reasons why some investors might hold China outside of a broader emerging markets allocation, he says.
“China is more investable today. Whereas before you could only enter through QFII [the ‘qualified foreign institutional investor’ regime], things are moving fairly quickly now that we have the Stock Connect programmes,” says McInerney, who is now president and chief executive of Mackenzie Investments, another Canadian asset manager. Stock Connect refers to cross-border trading initiatives involving the Shanghai, Shenzhen and Hong Kong stock exchanges.
He adds: “What’s really interesting about Chinese equities is they are a risk diversifier. At the current point in time, the correlation of the China stock market is very low – not just to developed markets, but also to emerging markets.”
He adds: “When I started in the industry in the late 1980s, emerging markets were brand new. People saw they were very volatile markets, but eventually people began to make separate allocations to EM outside of their global equity allocations.”
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