The problems facing China are mounting and leading Asian equity manager Sam Le Cornu of Macquarie Investment is so bearish on its outlook he has moved to his strongest underweight for the country in almost a decade.
Le Cornu, who runs the Delaware Asia Select and its Ucits version the Macquarie Asian All Stars, remains bearish on China's banking sector and his allocation to China is currently at 22.6% while his benchmark's, the MSCI All Country ex Japan, sits at 28.1%.
'We saw a focus on the bottom up fundamentals were deteriorating and we went somewhat underweight in March last year. We’re now the most underweight we’ve been in the Asian listed equities in the last eight years,’ said Citywire AAA-rated Le Cornu at a press briefing in New York on Thursday.
‘Within the China benchmark there’s a lot of Chinese banks, a lot of financials, and a lot of companies that we would call the side of the economy which is slowing: cement, steel, manufacturing.’
He stressed that his current focus in China is on consumer-driven themes: ‘Healthcare names and consumer discretionary names. Names which will benefit from this two speed economy.’
Le Cornu noted that the significant balancing act that is happening right now in China will continue for at least the next ten years.
‘We look at our positions in China as more on one side of the ledger than the other,’ he said.
In September 2015, the Hong-Kong based equities star told Citywire that his funds went underweight for the first time in seven years.
His colleague Britney Lam, investment strategist for the Asian listed equities team, also highlighted the opportunities in the Asian tourism sector.
‘Mainland Chinese are traveling, we are seeing a growth phenomenon there,’ said Lam. ‘There’s been special increases in tourism in Thailand, Korea and Japan. There’s been a demand for brand awareness as well.'
Along with Le Cornu’s approach to domestic demand, tourism and hospitals are high priorities for the fund’s Chinese exposure.
‘If you want to get Asia right, you have to get China right,’ Lam concluded.