IAM Newsletter 01/10/21

institutional asset manager maddy taylor captioned.jpg Asia remains firmly in focus, as China’s concurrent crises in its energy and property sectors spark fears that a “contagion effect” could damage the broader economy.

Recent uncertainty over indebted property developer Evergrande is causing asset managers to look again at rising risks of investing in Chinese assets.
The risk is that foreign investors, who have been opting for higher allocations to China in recent years, will react by “strongly readjusting portfolios of all Asian assets, mainly bonds, but also indices”, according to MAPFRE Asset Management.

Meanwhile, others such as Aubrey Capital Management say that market tumult has made valuations of Chinese assets “a lot more attractive”. 
Elsewhere, Japan’s likely next Prime Minister was decided this week, with former foreign minister Fumio Kishida winning the leadership of the country’s majority party. 

Current PM Yoshihide Suga is due to step down later this year, after suffering a slump in approval ratings over his government’s slow response to coronavirus, and the unpopular decision to hold the Olympic Games.
This has boosted investor appetite for Japanese equities, with both the Nikkei 225 and Topix equity indices hitting highs not seen since the early 1990s. 

“The markets are taking it as anyone but Suga is good news,” said T. Rowe Price’s Japan Equity team. The firm expects Japan will “meaningfully catch up in terms of market performance” as coronavirus vaccinations and potential economic stimulus continue are rolled out.  

Madeleine Taylor
Editor, Institutional Asset Manager


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