After successfully capitalizing on China’s stock rally in late September, Fidelity International’s George Efstathopoulos is increasing his positions in Chinese equities, anticipating fiscal stimulus measures will support economic growth, Bloomberg reports.
Efstathopoulos, who manages approximately $3 billion in assets from Singapore, rotated into mid-cap stocks listed on the Chinese mainland last week, after taking profits from his earlier exposure to Hong Kong-listed shares during the recent rally. His focus is now on the CSI 500 Index, which has underperformed the blue-chip CSI 300 Index this year.
In an interview last week, Efstathopoulos expressed confidence in Chinese authorities’ ability to manage the economy and support growth, especially through fiscal stimulus. He believes that onshore Chinese stocks, particularly mid-cap shares, are better insulated from geopolitical risks and should stand to benefit more from government measures aimed at boosting the economy.
Efstathopoulos’s optimistic stance contrasts with more cautious views from some Wall Street analysts, who have grown wary of Chinese stocks following concerns over potential tariffs and a lackluster fiscal package. However, Efstathopoulos, who has navigated through various economic cycles by investing in both Chinese bonds and equities, believes that China has sufficient policy tools to mitigate any potential fallout from US trade tensions, particularly if tariffs proposed by the US president-elect are implemented.
Chinese stocks have experienced significant volatility this year, falling to a five-year low in February before a surge in late September, when a monetary stimulus package helped propel the CSI 300 Index up 32% in just six trading sessions. This volatility has proven beneficial for Efstathopoulos, who also profited from purchasing stocks during the January market downturn. He raised his exposure to Chinese stocks to around 4% of his portfolio in the summer, reduced it to 1% during the September rally, and has since increased it back to 3-3.5% with his latest move into onshore mid-cap stocks.
Efstathopoulos manages Fidelity’s global multi-asset growth and income fund, which has delivered a 9.5% return over the past year. The fund aims for an annual return of 7% to 9% over the investment cycle.
Despite his positive outlook, Efstathopoulos is aware of the risks in the Chinese market. Since the October peak, stocks have lost momentum, and the latest economic data has been mixed, with retail sales improving but deflationary pressures persisting. In addition, growing tensions between the US and China under President Trump’s administration have raised concerns about the potential impact on trade.
Efstathopoulos, however, believes it makes sense for China to wait for more clarity on US trade policy before deploying additional stimulus. He also notes that China has diversified its export markets since the first Trump administration, which may help mitigate any negative effects from trade disruptions. He anticipates that if fiscal stimulus successfully boosts domestic consumption, the CSI 500 Index could emerge as one of the biggest beneficiaries of these efforts.
