Caixin
Nov 24, 2020 07:54 PM
FINANCE

U.K. Pension Fund’s Chinese Portfolio Managers See More Foreign Money Flowing Into China

A screen shows stock market closing data on Nov. 3 in Shanghai.
A screen shows stock market closing data on Nov. 3 in Shanghai.

Two asset management firms that run money for a large British pension fund are predicting that overseas investors are going to ramp up investment in Chinese mainland markets to take advantage of what they see as long-term opportunities.

“Investors who have already invested in China would consider increasing their investments. Those who haven’t invested in China before would consider doing so,” said Shi Bin, head of China equities of UBS Asset Management (Hong Kong) Ltd.

In recent months, foreign investors have become a greater presence in the mainland stock and bond markets amid China’s economic recovery, attracted by relatively high returns on yuan-denominated assets and regulatory changes to further open up the country’s financial markets.

UBS Asset Management is one of two asset managers that Border to Coast Pensions Partnership Ltd., one of the largest public sector pension pools in the U.K., recently appointed to manage a new Chinese equity portfolio. The funding for the portfolio is expected to be 300 million pounds ($400.2 million) to 500 million pounds. Border to Coast operates 11 local government pension funds in the U.K. with total assets of 45 billion pounds.

The fact that China has contained its Covid-19 epidemic and achieved a quick economic recovery has raised overseas investor interest in China, Shi told Caixin in a recent interview. “Our clients are aware of the long-term potential of the Chinese market and have increased their investment.”

FountainCap Research and Investment (Hong Kong) Co. Ltd. is the other firm charged with running Border to Coast Pensions’ new Chinese equity portfolio. FountainCap Chairman Frank Ding told Caixin that overseas investors are optimistic about China as its reform and opening-up strategy and improving core competitiveness of Chinese enterprises will continue to create value for shareholders and benefit employment and innovation. “(Overseas investors) have no plans at all to retreat from their investments (from China),” he said.

Official data show that outstanding overseas holdings of Chinese interbank bonds reached nearly 3 trillion yuan ($456.2 billion) at the end of October, up 36.9% from the end of last year. Overseas holdings of mainland equities stood at about 2.75 trillion yuan at the end of September, up 30.9% from the end of 2019.

Sound Chinese economic fundamentals and the recent appreciation of the yuan are making A-shares a lot more attractive, analysts at brokerage Donghai Securities Co. Ltd. wrote in a report last week. “It is quite likely that overseas funds will continuously flow in in the long term.”

Multiple analysts said the Covid-19 pandemic has made some changes to China’s economic structure, such as accelerating the development of its digital economy.

Shi noted that the pandemic has also pushed some industries to embrace changes at a faster pace. Many changes in industries such as online education that would have taken three to five years have occurred in just a few months, he said.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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