US Fund Manager Boosts Chinese Stocks Amid Expectations of Significant Stimulus and $6 Billion Inflows

A U.S. investment manager is including Chinese stocks in its portfolio, anticipating significant economic incentives and investments. Numerous international companies are currently underinvested in China. However, an executive predicts that a move to a balanced stance could prompt a $6 billion influx into Chinese assets.

Principal Asset Management, an American financial management firm, has indicated that China is making significant efforts to rejuvenate its economy, resulting in a positive shift in investor attitudes. Some suggest that the government should promote steady and gradual market growth instead of volatile price fluctuations.

"Both indirectly via Hong Kong and directly, we've been increasing our investments in China," stated Steve Larson, a global equities portfolio manager, at a Hong Kong conference on Thursday. "My view has changed from being doubtful to much more positive about our future prospects."

Although the fund has a lower than expected investment in China, Larson believes it's making the right steps. His company, which is a segment of the Principal Financial Group based in Des Moines, Iowa, oversees approximately US$699 billion globally.

The positive outlook mirrors the recently established trust in China's short-term potential among international investors, a result of Beijing's last month's policy boost aimed at halting the downturn in the real estate and equity markets. The measures, revealed on September 24, have ignited an unmatched surge in stock values, accompanied by periods of extreme fluctuations.

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Extreme fluctuations in stock markets of Hong Kong and mainland China

Principal Asset Management isn't the only one. According to a recent Bank of America survey, investment managers in the Asia-Pacific region have also grown more optimistic due to increasing anticipation for more aggressive monetary policy relaxations. They have invested more in Chinese holdings while reducing their investments in India.

"Being investors, we are typically wary of Chinese government strategies as there have been significant problems with implementation in the past," commented Alan Wang, the managing director and principal investment officer for Greater China shares. "However, this time, I feel there are several significant factors," he continued, referring to the new financial and budgetary incentives.