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‘No rule of law’: investors divided over Chinese markets

This week there was a clash between two of the world’s most prominent investors. This reflects the widening inequality on Wall Street regarding the feasibility of funding in China.

Xi Jinping president in the past 10 months, since the launch of a series of regulatory measures for the sector leading up to the video game from education, fund managers has cooled a large economy in the second in the world. The move wiped out nearly half the value of the US-listed Chinese stock Goldman Sachs basket from its peak in early 2021 and stopped the once vibrant flow of New York-listed Chinese companies. ..

But this week, disagreements were revealed when BlackRock, the world’s largest asset manager, announced Wednesday. Raise $ 1 Billion For the first investment trust in China, I was tempted by the opportunity to take advantage of the country’s growing savings market.Just a day ago, billionaire financier George Soros told The Wall Street Journal that BlackRock’s move to China “Tragedy mistake”..

A 91-year-old former hedge fund manager, known as “BlackRock’s mistake,” said Chinese investors said Rude awakening“Xi sees all Chinese companies as a one-party tool.”

According to a study by data provider Copley Fund, managers managing active global equity funds have cut their allocations to China and Hong Kong to the lowest level in four years. Copley looked at a sample of 381 funds with over $ 1 trillion in assets and calculated that more than a quarter of the benchmark’s global index currently holds shares in China and Hong Kong. At the beginning of 2015, a peak of 45% of investors made such a big bet on China.

“I don’t know what Chinese companies are running for: profits or government,” said one London-based hedge fund manager. “There is no rule of law. Avoid China — or be an insider.”

Cathie Wood, CEO of Ark Invest and one of the hottest investors, told an institutional audience Thursday that her fund was “dramatically.” Reduced its exposure From the end of last year to China.

She said Chinese authorities are now focusing on social issues and social engineering at the expense of capital markets. Currently, her portfolio contains national stocks only if the company is “currying” in Beijing.

Jitter for foreign investors reflects a 10-month period in China characterized by a series of sudden attacks by Xi in the business and economic arena.These unexpectedly harsh interventions have created an unpredictable feeling that some investors and analysts have said they could create a vast market for the country. Virtually impossible to invest..

Communist Party ““Common Prosperity” CampaignStrict limits on the amount of time allowed for young people, including crackdowns on China’s largest tech companies and real estate speculation Play video games, And forbidden for commercial purposes Education sector..

Chinese authorities are also so-called Variable Interest Entities — The legal structure that underpins $ 2 trillion in national stocks in the US market. These vehicles encourage foreign investment in companies such as Alibaba and Tencent.

The latest development was made by the Communist Party Committee.Regulate excessively high income, Spurring the waves Charitable donation And we pledge to show consistency with policy priorities by major private sector entrepreneurs.World’s largest stock Luxury goods companyThe acceleration of growth by China has also fallen into this apparent dislike of consumption.

However, as some foreign investors have packed their luggage, other investors, many of whom have invested in the country for many years, are doing well.

Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, said at the Bloomberg event on Wednesday that China and Singapore are “part of the world, not just the opportunities they offer, but you can’t ignore them.” Said. If you aren’t there, you lose excitement. “

People with a more optimistic outlook acknowledge unpredictable political risks, but regulatory intervention by Chinese authorities is not new, and its drawbacks are the long-term bullish story of increasingly wealthy consumers. Claims to be higher.

Fund managers aren’t just looking to invest in Chinese assets. They are also looking at ways to serve consumers there. Along with BlackRock, Foreign investors Amundi and Schroeder in Europe, including JP Morgan Asset Management and Goldman Sachs Asset Management in the United States, are expanding into China as a joint venture with Wealth Management.

In a statement, BlackRock said it would like to provide “retirement system expertise, products and services” to China, which “is taking steps to address the growing retirement crisis.” He declined to comment on Soros’s criticism.

From an investment perspective, fund managers sticking to China have politics to identify sectors whose strategies are in line with the Communist Party’s stated objectives, and companies whose reputation is declining compared to their competitiveness. It is said to be trying to overcome the noise. US or European peers.

Andrew Lo, Invesco’s Head of Asia Pacific and $ 1.5 trillion in asset management, said: We are increasing the amount of money we invest in Chinese securities and increasing the number of analysts covering domestic tech companies.

“China is not against entrepreneurs and capitalists … We maintain a commitment to a healthy domestic capital market and want to thrive in innovation in the private sector,” he said.Recent regulatory interventions are trying to deal Exclusive tech company He also added a for-profit tutoring company for long-term growth and social welfare benefits.

Regulatory crackdowns on China’s leading tech companies “mean that smaller and more innovative companies could enter the market and provide a more equitable and balanced competitive space,” Lo said. I might do it, “he added. We look forward to more listings and more innovations. ”

Others are determined to stick to investment as well, as a “common prosperity” policy will signal further growth in China’s consumer sector. Mark Marty Russian, CEO of Aubrey Capital Management, a $ 1.6 billion boutique based in Edinburgh, said: “If you can find a company with a big competitive moat that can use it, you can still make a lot of money.”

A rebase line chart showing that US-listed Chinese stocks can withstand more sales than the wider market

Another strategy, like Ark’s Wood, is to tailor it to the purpose of the government. “I bought a variety of domestic and international businesses for China that lead to innovation, consumer, health and wellness, and technology,” said Soros Fund Management, which currently operates Sydney-based conduit capital. Jack Dwyer said. “These businesses are valued at significant discounts to their peers in other jurisdictions.”

Electric vehicles, rare earth elements and semiconductors also want to lead to China’s transition to a green economy and strengthen its domestic supply chain. “Looking at China, I think it might be a matter of what works, rather than thinking that the wheels are down,” he said.

Additional report by Chris Flood in London

‘No rule of law’: investors divided over Chinese markets Source link ‘No rule of law’: investors divided over Chinese markets

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