Janus Henderson has begun to rotate its Chinese equities portfolios by reducing their exposure to consumer companies in light of the coronavirus and favouring construction firms.
The firm ran a Horizon China and a China Opportunities fund, as well as several Asia-focused funds, and Chinese equities portfolio manager, Charlie Awdry, said the future economic impact of the coronavirus would be ‘extremely difficult’ to quantify.
There had been over 59,000 cases of the virus reported in China and 15 in Australia.
Awdry said opportunities were being presented by China’s increase in fixed asset investment (FAI) spending such as infrastructure spending and buying opportunities caused by the market sell-off.
“We will monitor the virus and economic activity closely going forward but have begun to tilt by reducing positions in some consumer businesses and adding more toward construction and FAI beneficiaries as a result of our expectations of accommodative future policy.
“Banks may again be called to do national service and so we still avoid their shares. Healthcare has long been an attractive industry for investment driven by the tailwinds of a rapidly ageing population and this episode is a difficult reminder that much investment and reform needs to take place in the sector.
“The selloff in the market is giving buying opportunities that we are looking to take advantage off and it will be interesting to see how investors balance near-term earnings based valuations that will suffer due to negative profit revisions and long term valuations that will be unaffected.”
The MSCI China index returned 6.3% since the start of 2020 while the Shanghai Composite index lost 0.7%.