BlackRock downgrades Chinese stocks as conviction sours amid property slump and stimulus policy limp
- The world’s biggest money manager lost confidence in Chinese stocks and their emerging-market peers after turning bullish in February
- The MSCI China Index has lost 11.8 per cent since late February; Chinese stocks alone account for 30 per cent weight in MSCI EM Index excluding Taiwan stocks
Strategists at BlackRock Investment institute downgraded its tactical view on Chinese equities and their emerging-market peers to neutral from overweight, saying “China’s property sector remains a drag even with growth showing signs of stabilising.”
“Growth has slowed. Policy stimulus is not as large as in the past,” strategists including Jean Boivin and Wei Li wrote in a report published on Monday. “Structural challenges imply deteriorating long-term growth” [while] geopolitical risks persist. “We see growth on a slower trajectory” in emerging markets, they added.
The institute provides BlackRock, which manages about US$9.4 trillion of assets, with research and insights on public and private markets, economies, politics and asset allocation.
The strategists last raised Chinese and emerging-market stocks from neutral to overweight on February 21, based on their conviction over the next six to 12 months. They cited “short-term opportunities from China’s restart” after Beijing abandoned its zero-Covid policy to save the economy.
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The 1,421-member MSCI Emerging Market Index has fallen 1 per cent since the upgrade, according to Bloomberg data. Stocks from mainland China, Hong Kong and Taiwan made up almost 45 per cent of the weight in the gauge. Over the same period, the MSCI China Index slumped 11.8 per cent while the MSCI World Index advanced 7.8 per cent.
