Interview | Investors should consider non-US stocks, including Chinese equities, says US veteran investor

Investors should consider non-U.S. stocks, including Chinese equities, given such factors as a rebalancing effect in global equity markets, low valuation in Chinese stocks, and resilience in the Chinese economy, according to a senior U.S. strategist.

Now, there is an infatuation with U.S. stocks globally, and many non-U.S. equities, including many emerging markets or Chinese equities have been ignored, said Brendan Ahern, chief investment officer with U.S.-based asset management firm Krane Funds Advisors LLC, a specialist investment management firm focused on China, Climate, and other uncorrelated assets.

The situation builds the opportunity and the foundation for a period of outperformance in non-U.S. stocks said Ahern in an interview on Wednesday.

"It won't happen overnight; it will happen over time, but we do believe that investors should be considering rebalancing," he said.

There is a rebalancing not just to China and emerging markets, and "we certainly believe that today offers a great entry point," said Ahern.

Federal Reserve Chairman Jerome Powell's dovish pivot in his press conference after the latest meeting of the Federal Open Market Committee triggered a deep dive of the U.S. dollar and yields of long-term U.S. treasury bonds. Meanwhile, the Dow Jones Industrial Average Index set new record highs.

If the U.S. dollar does weaken, driven by the Fed's potential cut of interest rates and that helps spark that rebalancing, "we think it's an opportunistic period to be considering Chinese stocks," Ahern said.

One of the potential catalysts for Chinese equities is simply a weaker U.S. dollar. For many foreign investors, if the U.S. dollar weakens, that will hurt their returns, so they might return to their home markets, he said.

There are opportunities to buy low, which is a key tactic to success, and "we do think Chinese equities offer a very strong opportunity," Ahern told Xinhua, citing the facts that many Chinese companies buy back stocks and many asset managers recommended their investors to take advantage of this downturn in Chinese equities.

The U.S. stock market performed so well over the last 10 years, and it's very rare to see the outperformance to continue in the next decade, Ahern noted.

Citing the successful investment in China's electric vehicle maker BYD Co., Ltd. by legendary investors Warren Buffett and Charlie Munger in 2008, Ahern said investors in Chinese and concept stocks will be rewarded. "We just have to be patient," he said.

Last week, Ahern visited China and met with investors and some of the companies invested by Krane Funds Advisors. "Seeing is believing, and I would recommend other investors, other tourists to go and do the same and see for themselves and see how resilient China's economy is," said Ahern.

"We think there are reasons for investors to be excited about 2024 for the Chinese economy," he said, referring to factors such as China's incremental policy implementation strategy to provide support.

"Asia including China is an area of improvement going forward, and we're optimistic (in) the year of the dragon China's economy will roar," said Ahern.

(Source: Xinhua)