This is why investors can ignore Chinese assets no longer, says UBS

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“China has become too big and special for global investors to miss.”

That’s the view of Mark Haefele, chief investment officer at

UBS

Global Wealth Management, which has made a case for what it sees as “very dissatisfied” investors in order to awaken what the country has to offer.

For a start, he sees tremendous growth ahead. At the country’s annual gathering of legislators, the country’s leaders set out ambitions for 6% over-surplus this year, with the Covid-19 pandemic largely under control. But UBS is seeing growth reach as high as 8%, noted Haefele, its note to clients.

“Over the past 20 years, China’s economy has grown fivefold, and now accounts for about 20% of total global economic output and 30% of annual global GDP. [gross domestic product] growth, ”he said.

The country is also making great strides as a global leader in technology and innovation, he said. “A R&D [research and development] Consumption is growing twice as fast as in the US, and is home to the largest stock of industrial supercomputers and robots. ” On the digital divide side, China accounts for 57% of the world’s e-commerce market.

China has also set a goal to be carbon neutral by 2060, aided by softer infrastructure and a key role on electric vehicle battery technology, the CIO said.

Combining the best of those worlds, Chinese data released Tuesday showed car sales in February from an earlier year at the height of the pandemic and lockout in the country. Passenger car sales more than quadrupled to 1.18 million per year, taking shares of electric vehicle manufacturers

Tesla

and based in China

Nio

lift Tuesday.

Other financial markets are emerging in the country, making investment opportunities much more accessible, says Haefele. Foreign investors can access Chinese funds through American investment receipts and growing production of onshore stocks in global standards also facilitates a path for foreign investment.

The diversification benefit is also something that investors will not pay attention to, points out Haefele. China’s economic circles and interest rates are often different from the rest of the world markets. That’s because of a domestic economy and a monetary policy that doesn’t coordinate with the rest of the world.

Haefele will give one example of this from 2018, when the Federal Reserve took interest rates amid strong growth and the People’s Bank of China was on the other side as its economy slowed. This resulted in higher bond yields in the US and lower in China.

To be sure, however, investors may face near-term pressures even as Haefele emphasizes long-term gains. Chinese stock has been at an all-time high until 2021. The

CSI 300

the index is down nearly 5% year-on-year, after a 24% gain in 2020, a 35% increase the year before, and a 21% fall in 2018.

The index fell 2.8% Tuesday, with some observers citing concerns that regulators are starting to worry about potential froth in the market. China’s chief banking regulator Guo Shuqing said last week that stock rallies on Wall Street and other places where they look would look like bubbles and would eventually be right.

He raised concerns about foreign capital flowing too fast into China, as well as the profiteering of “dangerous” property in his country.