For global banks and fund managers drawing up their 2022 China investment strategies, one factor occupies their minds but eludes valuation models: President Xi Jinping's next five years in office.
There is a growing consensus that the selling is overdone, but with Xi all but assured an unprecedented third term next year and with policy in flux, investors have said positioning for the era to come is a more delicate task than simply bargain hunting."What you buy today and what you buy in the future will be quite different from what you bought last year, five years ago or 10 years ago," said Chi Lo, senior strategist at BNP Paribas Asset Management in Hong Kong.
Lo suggested avoiding "sunset" sectors such as coal and steel to focus on apparent priorities such as high-tech manufacturing or emissions reduction projects.Goldman Sachs compiled a 50-stock "common prosperity portfolio" containing renewable energy firms, some consumer-exposed companies and tech and state-owned firms with a focus on research, among others.
aligns better with policy priorities than MSCI's index which has heavy weightings to some out-of-favour internet firms. What's whacked markets and put investors on guard is less the program's broad direction - which bulls say now seems set for the next decade or so - than its unpredictable application, especially as Xi consolidates power.
"You've really got an all-powerful government, a one-party state really developing into a one-person state, so you don't have the feedback loops or protections of democracy."
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