During the pandemic, China has been revising its trade agreements with different countries to meet the new world order.
As the global economy evolves to match the new world order, market strategist at Willis Towers Watson Paul Colwell thinks it’s prudent for global investors to put more focus on the China share allocation. According to Colwell, global investors have approximately 5% of their portfolios in China shares. However, according to him, it is high time that investors raise their allocation up-to fourfold to reap anticipated benefits in the next decade.
“We just don’t think that’s enough to be fully prepared for the new world order,” Colwell told CNBC’s “Squawk Box Asia” on Monday. “They need an allocation of up to 20%”, he said.
Reasons to Raise China Share Allocation
Different market sectors in China including the manufacturing, the technology industry and also the health sector are likely to be strong pillar in the post-covid era. Particularly since they have already gone through a testing period and ready to go global as they thrive in the local market.
Coronavirus data shows Asia, especially China is ahead of the recovery curve; ‘first in first out’. Moreover, the country has been able to maneuver through the wild coronavirus infection rate in mainland China despite being ground zero.
The Chinese government has been laying a strong foundation to see the success of its economy post covid. This comes as most countries in the west face possible new lockdowns to control a second wave before an effective coronavirus vaccine or drug is approved for mass use. During the pandemic, China has been revising its trade agreements with different countries to meet the new world order. However, there remains notable tension between China and some countries including Australia, India, and also the United States.
Notably, most of the China stocks have performed considerably well in comparison to other global stock indexes. According to the metrics provided by MarketWatch, the Dow Jones Shanghai Index has rallied over 15% year to date.
This is an indication the Chinese stocks are headed for more wins in the post- covid era.
“For investors to properly position their portfolios for the post-Covid world ahead, in the new world order, they need to have more of their investment portfolios allocated into China,” Colwell said. “Geopolitical diversification is going to be a much more important portfolio … consideration in the years ahead.”
He further highlighted that the Chinese market is decoupling from the global relation thus free from geo-political differences that affect the market negatively.
“The China A-share market is relatively lowly co-related with developed markets. The Chinese economy operates at a fundamentally different frequency to that of the other major geographies, driven by different approaches to monetary policy, economic policy,” Colwell noted.
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