Despite the sentiment in China being rather bleak, Liechtenstein-based VP Bank, which provides asset management and investment advisory services, discusses why it has moved Chinese equities to overweight in the portfolio.

The record highs for bitcoin, gold and Japanese equities have recently triggered some buzz. The Japanese Nikkei index has even surpassed its high recorded at the end of 1989, according to VP Bank.

RBC Wealth Management said it maintains its overweight position in Japanese equities, despite the Japanese economy being in recession. Jeremy Osborne, head of Japan equity investment directing at Fidelity International, also thinks that Japanese equities still offer compelling value and that investors are underexposed to the market. See more commentary here.

Meanwhile, the sentiment in China is rather bleak at the moment. The property crisis has left deep scars, the economy is struggling and the stock market is miles away from its record highs. This is perhaps precisely why the National People's Congress recently ended with the announcement of ambitious growth targets. This was reported on, but it was almost lost in the wake of record-breaking news in other asset classes, VP Bank said in a note this week.

From an investment perspective, the bank thinks that this makes Chinese equities interesting. VP Bank has consequently moved Chinese equities to overweight in the portfolio. Overall, the bank said it continues to favour bonds over equities. 

“There is a great deal of pessimism in China, in stark contrast to the positive mood on the world stock markets,” Dr Felix Brill, chief investment officer at VP Bank, said. “This can also be seen as an opportunity. In such an environment, small positive surprises are often enough to trigger a change in sentiment that promises at least temporary price gains. We have, therefore, moved Chinese equities to overweight in our portfolio.”

Nevertheless, Chris Metcalfe at UK asset manager IBOSS highlighted recently how Chinese equity markets lagged global peers in 2023 and have had a difficult start to 2024. He has reduced Chinese holdings over the past 12 months, while gaining exposure to wider Asian and emerging market funds. See more commentary here about Chinese equities.