Pictet Wealth Management Returns To Chinese Stocks After 18-month Hiatus

The wealth management arm of Swiss bank Pictet Group is buying Chinese equities again more than 18 months after it shunned the asset class, joining other foreign investors dipping back in as they bet on improving economic prospects and less regulatory intervention.

Pictet Wealth Management Asia Chief Investment Officer Alexandre Tavazzi said the unit, which has $291 billion under management, started adding back Chinese equities last week through its discretionary portfolios, which are mandates designed for wealthy clients.

"We have reduced growth rates for the U.S. and Europe. So when we look at the overall market situation, we see one country standing out in terms of re-accelerating from here, and this is China," he said in an interview on Tuesday.

"So this is why we thought it makes sense to go back into Chinese equities."

China's easing of coronavirus travel rules combined with other policy signals have begun luring some foreign investors back to Chinese stocks, raising the chances that the market will sustain its bounce after months of heavy selling.

Pictet had moved out of Chinese equities in December 2020 because of rising uncertainties relating to slowing economic growth as well as a regulatory crackdown on the country's technology sector, Tavazzi said.

The wealth manager now expects powerful stimulus policies will rekindle growth momentum in the second half and in 2023 and also sees stock valuations as attractive, he added.

China's bluechip benchmark rebounded more than 6% in June and attracted $9.1 billion of foreign capital inflow, compared with outflows of $19.6 billion in other emerging markets, according to the Institute of International Finance.

Pictet's allocation to Chinese equities remain small so far, accounting for one quarter of exposure to emerging markets assets in managed portfolios, Tavazzi said. Chinese stocks have a weighting of around one third in the MSCI Emerging Market benchmark.

The wealth manager plans to increase its position in Chinese equities over time if China's economic acceleration after pandemic-related rule relaxations goes as expected, he said.

For now, however, Pictet is closely monitoring responses to persistent small COVID-19 outbreaks in cities such as Shanghai as well as policy easing in the technology and property sectors in particular.

Beijing has in recent months softened heavy-handed regulatory intervention that began in late 2020 when authorities abruptly pulled the plug on fintech giant Ant Group's IPO and later expanded to multiple industries, including technology, private education and property.

"Everything is a moving part ... when you get back into the water, you start by doing very gradually before you go deep," Tavazzi said.