Middle East investors have increased their exposure to China in the last year and plan to make further increases over the next several months, according to Invesco.

More than four out of ten respondents (44 percent) from the Middle East said they had increased exposure, while the majority (77 percent), would make further increases over the next 12 months. 

Nearly three quarters (74 percent) also expect better economic conditions in China, relative to those globally, over the next 12 months, according to an Economist Impact survey on global investors’ China exposure that was commissioned by Invesco. 

Invesco said that while COVID-19 has transformed economic behavior and financial markets, it does not seem to have changed investors’ strategic view of investing in China or where the opportunities are. 

Investing in China has recently drawn global attention following reports that Chinese conglomerate Evergrande is on the brink of default. Trading in Evergrande shares were suspended on Monday pending an announcement on a “major transaction”. 

Risk appetite 

In Invesco’s survey, half of survey respondents believe the pandemic had increased their risk appetite towards their Chinese exposure.  

While geopolitical uncertainty from US-China trade tensions linger, 72 percent of Middle East respondents said this ongoing dynamic has had a moderate or significant influence on them to increase Chinese exposure levels. 

In the region, 48 percent said their current exposure to China is through onshore fixed income, while 48 percent cited offshore equity markets, followed by onshore equities, including A-shares.

The top asset classes among alternatives were direct ownership of companies (42 percent) and real estate (38 percent). About 38 percent also said they would increase their allocation to onshore China corporate and local government debt. 

Investment themes 

The top investment themes are technology innovation (58 percent), financial services (38 percent), renewable energy (36 percent) and healthcare (34 percent). 

“While it is still in its early days, China’s ESG disclosures and reporting standards have been improving at a fast pace over the last five years, driven by an increased awareness of ESG issues by both companies and investors,” noted Invesco’s Chin Ping Chia, head of business strategy and development, China A Investments.

“The country also exhibits a significant determination to play a meaningful role in climate change mitigation going forward, such as moving toward carbon neutrality. We believe the nation’s ESG and climate ambitions will bring far-reaching transformational consequences to the China investment landscape and shape the way Chinese companies operate.” 

(Writing by Imogen Lillywhite; editing by Cleofe Maceda) 

Imogen.Lillywhite@refinitiv.com 

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here. 

© ZAWYA 2021