Investors should avoid a ‘pile into’ Chinese equities in light of the country’s rebound from the COVID-19 pandemic as risks still remain regarding investing in emerging markets, according to deVere Group.
The country had recovered well from the pandemic, earlier than other markets, and its CSI 300 index rose 27% in 2020.
However, investors should avoid the temptation to ‘pile into’ Chinese equities, according to Nigel Green, chief executive of deVere Group. This was due to factors such as the risky nature of the stocks and lack of transparency available to investors.
He suggested, while investors could hold a weighting to Asia, this should always be part of a diversified portfolio.
“China’s already impressive economic recovery is likely to pick up momentum and this will be extremely attractive. But as 2020 showed us with perhaps too much clarity, things can change quickly and so-called ‘certainties’ can shift overnight,” he said.
“Therefore, as ever, it is essential that investors have a truly diversified portfolio. This includes across geographical regions, assets classes, sectors and currencies.
“China, but also Asia in general, has massive potential and will likely outperform the rest of the world in 2021. However, investors must not get giddy and forget about the importance of diversification.”