Source | 21st Century Business Herald Author | Edited by Wu Shuang| Fang Haiping New Media Editor | Intern Hu Linlin
Global asset managers are sticking to turning their strategic gaze to the East.
In April last year, Vincent, chief investment officer of Amundi Asset Management, mentioned in a public interview that Amundi Asset Management was shifting its asset allocation from the West to the East. After a year, the 21st Century Business Herald reporter recently asked about its latest progress on this issue.
"About a year ago, Amundi Asset Management's long-term strategic focus shifted to Asia, including China. Last year, markets such as India, Japan and South Asia returned better, but China did not perform as expected. However, we are now more convinced than we were more than a year ago that there are good opportunities in the Chinese stock market, and therefore plan to maintain our investment allocation to Chinese equities." He says the challenge, he says, is convincing the client to consider this option. At the moment, Western investors don't really see a major shift in China's economic landscape.
Amundi, the French asset manager, is the largest non-US asset manager and one of the top 10 asset managers in the world, with approximately €2 trillion in assets under management and €400 billion in assets under management in Asia.
After the "New Regulations", bank-based wealth management companies and joint venture wealth management companies were gradually established, and the first Sino-foreign joint venture wealth management company in China, Huihua Wealth Management, was jointly established by Amundi Asset Management and Bank of China Wealth Management. A few days ago, the 21st Century Business Herald's "Dialogue with Asset Management 30" column interviewed Vincent Mortier, Chief Investment Officer of Amundi Asset Management.
"The domestic market share of Chinese companies is expanding
and expand overseas"
21st Century: How do you see the current transformation of China's economic landscape?
Vincent Mortier: China's economy used to grow by 8% and relied heavily on cheap exports and real estate, but now the real estate sector is a drag on GDP growth and is expected to lose about 4% of GDP. But now, China's economy is driven by innovative industries in the energy transition, electric vehicles, artificial intelligence, robotics or supercomputing.
For these innovative industries, China has developed a clear and consistent policy framework. These policies are having a real impact. China's GDP grew by 5.3% in the first quarter, and the purchasing managers' index exceeded 50. The world is witnessing the expansion of Chinese companies' market share at home and overseas. These policies are in line with the medium- and long-term goals that are being gradually achieved, so we are optimistic about China's policies.
I was surprised to see a huge uptick in sales for one of China's most popular spirits brands. It has already taken some market share away from Cognac, a French liquor brand. Is this due to a shift in consumer tastes or a policy? In fact, this could be due to a number of reasons. I think more of these industries are getting attention right now, which is good for the Chinese economy in the medium to long term.
21st Century: Recent official data shows that inflation levels in China and the United States are moving out of diametrically opposed markets. How do you see the difference between the two markets on inflation?
Vincent Mortier: The U.S. and China have different trajectories and paths. Inflation in the United States is falling, but at a much slower pace than the Fed expects. In the future, if tensions escalate in the Middle East, oil and gas prices will continue to rise, and inflation in the United States may become more volatile due to fluctuations in commodity prices. There are also structural factors that contribute to inflation, which the Fed has not grasped very well, and the Inflation Reduction Act (IRA) has shifted core inflation within the United States. In addition, the US energy sector is pursuing protectionism, which also brings inflation. However, wages in the U.S. job market continue to rise, creating a wage-price cycle. Therefore, it is difficult to say where inflation in the United States will eventually stabilize, but it is estimated that it will be between 2.5% and 3%.
At the same time, the Fed will tolerate inflation of up to 3% due to significant volatility. In addition, the risk of a resurgence in inflation remains. Now that the U.S. is at the low point of the first wave, whether it is in the second wave is still uncertain and difficult to predict. The battle against inflation is far from won.
"Equities are more attractive than bonds"
21st Century: How do you view China's current stock and bond market?
Vincent Mortier: It's obvious that stock valuations in the A-share market are low right now, and some of the larger companies are even cheaper in H-shares. We continue to believe that investing in the Chinese stock market is the right thing to do.
As for the bond market, the value of China's bond market is not very large at present, and bond interest rates have reached the bottom range. Bonds with low interest rates are not very attractive to foreign investors. But there is still some value for domestic investors. In contrast, equity risk premiums are quite attractive, with Chinese equities being more attractive than bonds, in contrast to the situation in the US or Europe.
21st Century: Amundi Asset Management and Bank of China Wealth Management, a subsidiary of Bank of China, have jointly established the first Sino-foreign joint venture wealth management company in the Chinese market, HSBC Wealth Management, what are your observations on the development of this company?
Vincent Mortier: We have observed that in recent years, wealth management clients have become more cautious in their investment behaviour, tending to avoid taking higher investment risks and are hesitant to allocate equity assets. In the future, HSBC Wealth Management will continue to enrich and expand its product line to better meet the needs of customers.
Amundi Asset Management continues to believe in the long-term potential of China's wealth management market. In our view, there is still plenty of room for China's wealth management market to accommodate different asset classes, including risky assets. At present, customers do prefer to allocate short-term and less volatile wealth management products. We need to fully consider this demand of our customers. With this in mind, HSBC Banking is already preparing and launching new products to enrich our product offering as much as possible. Currently, clients favor short-term projects with minimal volatility. As a result, HSBC Banking is taking it into consideration, reviewing and initiating new projects to facilitate product diversification.
21st Century: How do you see the regulatory trends in China's asset management market?
Vincent Mortier: From my point of view, the direction of regulation is indeed evolving, but it can't simply be said to be more stringent. It both protects consumers and ensures that the market is functioning in an efficient and transparent manner. So far, we haven't seen any disruptive or abusive regulation. Therefore, we welcome this evolution, which will put the Chinese market on a par with other markets.
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