Swiss private bank Union Bancaire Privée (UBP) has returned to the Chinese market, its chief investment officer said, returning to the world’s second-largest economy after pulling out last year.
The assets of UBP are more than 150 billion dollars. It returned to China in August after ending all Chinese stocks and loans by the third quarter of 2021, chief financial officer Norman Villamin told Reuters.
“We went from zero to neutral,” Villamin said. While many institutional investors have reduced investments in China since 2019 due to regulatory crackdowns against tech giants, deterioration of Sino-US relations, and a strict zero-covid policy, UBP is one of the few to commit money to the country.
Villamin said that the UBP saw some “hope” that there would be more incentives before and after the Communist Party Congress in October. “If some of the COVID restrictions start to ease, even if it’s gradual, at least we’re going in the right direction,” Villamin said.
UBP considered an underweight China tactically risky, he added. “China has gone through a recession, while Europe is in the middle of a recession and the United States is likely to go into recession in 2023,” Villamin said.
However, UBP only bought China A shares, in the domestic sector, and avoids companies that may be exposed to geopolitical issues.
The Chinese market has faced unprecedented challenges this year. Both the CSI 300 Index (.CSI300) and the Hang Seng Index (.HSI) fell more than 20°C, while hedge funds investing in Greater China saw the largest net outflows. at least 15 per year.
UBP believes that China will slowly recover, although it will not be smooth. Some deep problems, like the housing debt crisis, take a long time. “We think the goal (of China) with real estate is to reduce the sector’s share of the overall economy to reduce industrial leverage,” Villamin said. “We don’t see much growth there.” (This story corrects the second paragraph to say the bank has abandoned all Chinese stocks, not just mainland listed stocks)