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Investors should ‘China-proof’ their portfolios, affirms the chief executive of one of the world’s largest independent financial advisory firms.
Nigel Green, founder and CEO of deVere Group, which has $10bn under advice, is speaking out after China’s stocks on Monday plummeted the most since 2007. At the close, the Shanghai Composite Index had plunged 8.5 per cent.
Mr Green comments: “The slide indicates that the Chinese authorities are perhaps reducing capital inflows following their frenzied measures to support the stock market three weeks ago. It appears that, unsurprisingly, those measures are unsustainable in the longer-term, that the market is currently vulnerable without government support, and investors remain uncertain of the situation.
“This latest crash is another chapter in the China slowdown story. The unfolding situation in China is likely to create volatility in the financial markets until the end of the year. With this in mind, investors should consider ‘China-proofing’ their portfolios to manage risk and benefit from the inevitable buying opportunities.
“The best way to achieve this is to ensure that portfolios are properly balanced across regions, assets and industries, and by working with a good fund manager who will be able to help take advantage of these opportunities and secure the best stocks at the right time for their clients.”
Mr Green continues: “Whilst China’s slowdown is likely to be the big geopolitical driver of turbulence in coming months, I am confident there will be no hard landing as Chinese authorities have all the tools at their disposal to ensure it doesn’t happen.
“Indeed, the slowdown is on-trend. The economy is maturing and there’s a deliberate shift away from commodity-hungry infrastructure spending.
“However, as I noted during a recent trip to China, the Chinese government will need to do much more than they are currently doing to stoke domestic consumption to avoid the slowdown taking a firmer economic strangle-hold.”
The deVere CEO concludes: “The expected volatility in financial markets triggered by China rebalancing its economy will present challenges and opportunities for investors, and due to China’s weight in the global economy, investors would be wise to bear this in mind when constructing and assessing their portfolios.”
