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Allianz Global Investors Insights | February 2017

February 2017

Global Investor Insights

Global View

Takeaways from Our Hong Kong Investment Forum

Twice a year, our investment professionals from around the world meet at our Investment Forum to exchange ideas on the issues that matter most to our clients, including new macroeconomic and market developments and long-term investment themes. Our first Investment Forum of 2017 was held in the vibrant city of Hong Kong – a fitting location for an event with China as the lead agenda topic. Here are some of the highlights of our discussions.

Perspective on the Asia Pacific

Extracting Alpha from China’s Equity Markets

When many investors think about China today, they focus on a few well-publicized macroeconomic concerns: property bubbles, non-performing loans in the banking system or the renminbi’s weakness against the US dollar. In our view, these are all valid issues, but we see investing in China as more of a bottom-up story – one that can reward active investors who understand the size and subtleties of a booming marketplace.

Consider that there are now more than 4,200 Chinese companies listed on stock exchanges around the world – mostly in Shanghai, Shenzhen, Hong Kong and the US – with a total market-capitalization size of USD 10 trillion. That means there are more listed companies in China than in the US. As in the US, the sheer size of this group means there are always interesting companies to be found. But unlike in the US, many inefficiencies still exist in China’s equity markets – and it is here where active managers have an opportunity to deliver alpha to investors.


The Capital-Market Implications of China as an Asset Class

For investors, China can be a polarizing subject. A few years ago, many believed the country would play a crucial role in pulling the global economy out of the Great Financial Crisis, and that China’s growing economic power would be the most compelling investment story of the 21st century. For other investors, the extreme market volatility of recent years has given rise to growing concerns about the credit-fuelled nature of China’s economic development, and worries about whether China will successfully make its much-needed “rebalancing” transition to a different type of growth model.

But whether you’re a China bull or a China bear, China’s capital markets will likely become significantly more important to the global financial system in the coming years. And as China’s capital markets become truly accessible to global investors for the first time, investors may need to rethink the way they will access China in the future.

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Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. Equities have tended to be volatile, and unlike bonds do not offer a fixed rate of return. Emerging markets may be more volatile, less liquid, less transparent and subject to less oversight, and values may fluctuate with currency exchange rates. Bond prices will normally decline as interest rates rise. Below investment grade convertible and fixed-income securities involve a greater risk to principal than investment grade securities. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice. References to specific securities are not intended to be, and should not be interpreted as an offer, solicitation or recommendation to purchase or sell any financial instrument, an indication that the purchase of such securities was or will be profitable, or representative of the composition or performance of any AllianzGI product.

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Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested.