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Manager Question of the Month: The China Conundrum

Stock fund managers consider the trade-offs of investing in China.

Alibaba

Chinese markets have given active equity managers a lot to think about recently. Rocky U.S.-China trade relations have grabbed headlines and tied up global supply chains. A recent U.S. executive order blacklisted 31 companies suspected of aiding the Chinese military. Within its borders, China intervened in Ant Group’s highly anticipated $37 billion IPO at the 11th hour and ramped up antitrust scrutiny on the country’s dominant tech names, most notably Alibaba and Tencent. All this comes as the country tries to exert more control over Hong Kong, skirmishes over borders with India, and persecutes Uyghurs in its western provinces.

Manager research analysts recently asked of the fund managers they regularly interview (Note: these fund managers manage strategies that are available for investors in the U.S.), “Do recent events make you more hesitant to invest in Chinese companies, and if yes, have you taken specific action?” The managers provided some interesting takeaways. Though the managers polled remained steadfast in their pursuit of new opportunities in China, tit-for-tat trade restrictions have irritated investors and changed how some of them view risk. Still, asset managers remain bullish on China’s Internet giants.

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