Pictet Wealth Management is maintaining its overweight position on China while turning more optimistic on India.
David Gaud, the company’s Singapore-based chief investment officer for Asia, said both economies are delivering relatively fair expectations and have not derailed from the scenario at this stage.
However, the supply side reform and deleveraging process in China would mean that investors will have to be more selective in terms of where and what they invest in, he said at a press briefing.
In China, there are good investment opportunities within the property and energy sectors.
As consolidation is taking place in China’s property sector, balance sheets of Chinese property developers have improved dramatically and they are a lot savvier about their business models.
‘We have exposures to Chinese property stocks. It’s less than earlier of the year, but it’s there,’ he said. ‘Maintaining exposure helps you to come back when the time is good.'
Meanwhile, China’s energy sector has been doing great so far this year.
Investment in China’s energy sector could offer investors a 3.5% dividend, which is above average returns in Asia. It also help investors diversify away from risk – particularly away from expensive healthcare and technology stocks, as well as maintain exposure to China.
Gaud said he considers this year to be a good year for active management in China.
‘This is what we’ve been waiting for the past 20 years for China – for better differentiation,’ he said, adding that investors will get paid for the level of risks they are taking.
Gaud said more global investors should start paying attention to emerging markets and including them as core holdings in their portfolio.
Pictet, which downgraded India to underweight from an overweight position last year, has also turned neutral on India few weeks ago.
At the end of last year, the India market was expensive, and there were also concerns about the moving currency and deficits in the country.
However, India saw positive growth in the private investments.
India also appeared as the best case among the deficit-led countries, thanks to behaviour of credit and currency markets, Gaud said, adding that Pictet has entirely exited its investments in the Philippines and reduced its exposure to Indonesia.
What’s more, India is a country that will be less affected by the ongoing US-China trade war.