Asian Fund Managers Boost China Exposure 13% Despite Structural Concerns

In September, a survey conducted by Bank of America among Asian fund managers revealed a mixed sentiment towards the Chinese market. While there was a notable improvement in short-term sentiment, with managers increasing their exposure to China, a significant 70% of respondents still view the Chinese stock market as a "structural market." This perspective indicates that the market is influenced by long-term structural factors rather than short-term fluctuations.

The survey, which included 101 fund managers overseeing 207 billion dollars in assets, showed that only 9% of respondents expected the Chinese economy to weaken in the next 12 months, a significant drop from 59% in April. This shift in sentiment is reflected in the increased exposure to China, with the proportion of managers who are "fully exposed" to the Chinese market rising from 3% in August to 13% in September. However, the survey also revealed an increased willingness to "sell on rallies," with the proportion of managers expressing this intent rising from 7% to 17%.

This cautious approach suggests that while managers are optimistic about China's economic prospects, they are also mindful of potential market volatility and regulatory risks. The survey's findings underscore the complex nature of the Chinese market, where structural factors such as regulatory policies, economic reforms, and long-term growth prospects play a crucial role. Despite the short-term optimism, the prevailing view among fund managers is that the market's performance is driven by these underlying structural elements, which require a more nuanced and long-term investment strategy.

The increased exposure to China by fund managers suggests a growing confidence in the region's economic prospects. However, the cautious approach to selling on rallies indicates a prudent stance, where managers are mindful of potential market volatility and regulatory risks. This balanced view reflects the current sentiment among Asian fund managers, who are optimistic about China's long-term growth but remain vigilant about short-term market dynamics.

The survey also highlighted the investment themes that are currently favored by fund managers. The most popular theme was "anti-internal competition," with 52% of respondents expressing interest. This was followed by artificial intelligence/ semiconductors and cyclical stocks, both of which were favored by 22% of respondents. In contrast, themes such as real estate, tourism and leisure, and stock buybacks/dividends were less popular, with 0% of respondents expressing interest in these areas. This reflects a focus on sectors that are expected to benefit from changes in consumption patterns and technological self-reliance, while traditional sectors are viewed with more caution.

In addition to the survey's findings on the Chinese market, it also provided insights into the savings and investment behavior of Chinese households. The survey found that 61% of respondents believed that households would prioritize saving money in bank accounts, a slight increase from 53% in August. However, the proportion of respondents who believed that households would invest in stocks, bonds, or real estate increased from 23% to 26%. This suggests that while households still have a strong preference for saving, there is a growing willingness to invest in financial assets.