The Magellan Global fund is exploring increasing its weighting to China.
In an update of the Magellan Global fund, which currently had a 4% weighting to companies exposed to China, managers Nikki Thomas and Arvid Streimann said the re-opening of the country following strict COVID-19 protocols was a positive story.
The re-opening had previously been expected to take place in March 2023 but an announcement was made in December 2022 which led to things “moving rapidly”. This presented an opportunity, the managers felt, to put some of its 9% cash weighting to use.
Thomas said: “Things have moved very rapidly and we’ve seen a lot of change around stimulating the economy, around regulatory risk reducing and geopolitically, even on local politics, that the tone of the conversation has really changed.
“China and what happens there is going to be the story of 2023, when China grows then that’s good for the rest of the world and that makes us optimistic.
“We’re certainly looking at China as a positioning story in the portfolio, it doesn’t mean we are going to be diving into big positions in China as long-term risks remain around the fact you have central government control but there’s real opportunity to get involved in what will emerge as that China story plays out.”
Streimann also noted US/China frictions, a tense issue since the tenure of US President Donald Trump, had eased somewhat as China focused on growth rather than geopolitics.
“If Xi Jinping has more of a focus on growth to keep people happy then he’s probably not going to react to what the Americans are doing.
“In the short term, maybe those US China frictions and the chance of those spiralling out of control has reduced a bit. The Americans are still going to needle them but I think the Chinese are probably turning the other cheek for a while until growth gets to a more trending level.”
