Chinese stocks are attractive, but investment managers are cautious ahead of the US election

By Koh Gui Qing

NEW YORK (Reuters) – Asset managers at public and private funds expect certain Chinese stocks to trade at attractive prices but are not yet buying due to uncertainty surrounding the upcoming U.S. election, an investment adviser said.

Christopher Ailman, former chief investment officer of the California State Teachers’ Retirement System (CalSTRS), said China was the focus of a regular discussion he moderated last week for more than a dozen asset managers in the 300 Club, which describes itself on its website is a group of leading investment experts whose goal is to raise awareness of current investment topics.

The group includes representatives from global investment funds such as French asset manager Amundi, which manages €2.16 trillion, and Canada Pension Plan, which manages $632.3 billion.

A representative for the group said he had nothing further to add when reached for comment.

Although the conversation was supposed to revolve around the risks investors face as tensions between Israel and Iran worsen, Ailman said the dialogue quickly turned when it became clear to investors that Iran’s oil exports are largely consumed by China become.

“When you think about geopolitical risks as an investor, China is at the forefront,” said Ailman, who withdrew from the $347 billion CalSTRS fund in late June. “Everything almost has a connection to China.”

Ailman said asset managers agreed on the call that the prices of certain Chinese stocks were attractive from a technical and fundamental perspective, but no one indicated they would increase their Chinese investments.

“Nobody wants to rush into the U.S. election,” said Ailman, chairman of the North American chapter of the 300 Club. He did not say which Chinese stocks investors found attractive.

Due to heightened political tensions between China and the U.S. and China’s slowing economy, many asset managers have reduced or abandoned their investments in China, Ailman said, adding that U.S. and Canadian funds are particularly “gun-shy” at the moment it’s about investments in China.

Given that Chinese investments typically make up no more than 5% of North American funds’ portfolios, he said asset managers’ analysis of Chinese stocks is not as important as their views on real estate or valuations of U.S. technology stocks.

China’s stock market has been on a rollercoaster ride, rising more than 20% since a series of policy announcements on September 24 fueled expectations that the Chinese government would unveil a major bailout to revive the struggling economy.

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Market euphoria over a major stimulus package has faded, although some analysts were hopeful that stock market gains would give way to a steadier – and more sustained – recovery.

(Reporting by Koh Gui Qing)