Speaker : Altaf Kassam
I wasn't the most popular kid at school, hard to believe, I know. This makes close reunions a bit awks. When I walk up to my former classmates, I see them frantically scanning for my name and planning their escape. The best bit about class reunions though, is meeting that unexpectedly successful kid. The one who seemed a bit different at school, but now is the most in charge of their own destiny and loving what they do. For them, I hope their success now makes up for that time, spent alone and misunderstood in the corners of the classroom in the playground. For us, China is different, actually unique as an investment destination, but you need to look beyond the headlines to see the interesting trends that are going on there. And when you do, you realize it's the size of the market and the opportunity, which means it needs a dedicated investment approach. Why? Well for a start, China is underrepresented. For an economy, that's a sixth of the world's, it actually only makes up 4% of MSEI aqui, the most representative global benchmark in equities. And on the fixed income side, foreigners only own about 3% of its bond market, which is the second largest in the world. And the fact that China is different also gives you correlation benefits. That's true on the equity side, where the correlation is lower than any other kind of similar pair, but very much so on the fixed income side, where you get a lot more of this diversification benefit as well. And sticking to fixed income, what you do get from Chinese bonds is a positive, real yield, which is really hard to find elsewhere. And on top of that, people worry about the foreign exchange risk, but we think that the policy priorities in China are very much about managing that currency and keeping it stable. So we don't think that risk is one to worry about right now.
So all in all we think China won't ever be the coolest kid in school, but at the same time, it's not one to ignore. As for me, well I feel like I'm making up for lost time and looking forward to that next class reunion. All the best for 2022!
