(Finance) – “Le Investment issues in China are manybut they depend somewhat on what are also the priorities of the government. The government’s priorities primarily concern common prosperity, i.e. this desire to increase the average per capita income of the Chinese population and therefore to make the middle class grow more and more. This middle class also consumes in a different way, so in fact it is a little more oriented towards giving importance to so-called premium brands, because they are both a symbol of social status and obviously higher quality products. They are much more oriented towards domestic brands than external ones as they once did, also because the average quality of production of goods and the ability to innovate of Chinese companies has changed a lot in recent years”. He told Finance Teresa Gioffreda, Head of GWM Client Coverage Italy at UBS AMon the occasion of the thirteenth edition of the Salone del Risparmio, the reference event in the asset management sector, organized by Assogestioni.
“There financial part is very importantand – the private banking and asset management part – with investments by this growing middle class, pension planning and also the health aspect is another very important growth trend, because greater disposable income obviously also allows us to take better care of ourselves and better – he added – So with the reopenings obviously the whole part of consumption could also benefit from it. Another thing to watch out for is regulatory change: if regulation has weighed in recent years in China, in reality we can say that since the end of last year there has been a U-turn both on covid policies and on policies concerning the real estate sector and support for the economy in general”.
Gioffreda highlighted how the economic cycles among the major global economic areas “are misaligned, so China slowed down earlier and is now stimulating the economy, so we can perhaps expect growth going forward.Europe is instead surprising in a positive way, because last year we had a fear of a harsh winter and low energy supply that could lead to an economic slowdown, but these events have not occurred. On the other hand, however, this high inflation, which derives somewhat from the war but also from the profit margins of businesses, is weighing and will weigh on economic growth, also because obviously the ECB is focused on fighting the price hike and therefore to maintain a somewhat more rigid monetary policy, which therefore counteracts the positive effect that we can expect on the economy, also thanks to a solid demand that comes from China also in luxury goods for example” .
“If we are positive on China and neutral on Europe, we are underweight the US – continued the manager of UBS AM – This is because in any case the market, despite the rate hikes by the Fed and the possible economic slowdown, has actually continued to rise significantly since the beginning of the year. And it’s actually continued to move up with the top 15 companies, which made a large portion of the gains. Right now We believe valuations are expensive relative to what earnings forecasts are this year, so current S&P levels may be compatible with double-digit earnings growth, but we expect a slight slowdown; they might be compatible with 2% interest rates, but we’re still on much higher interest rates. For these reasons we are underweight, because the negative news may weigh more than the potential upside we could have in case of positive news“.