While China’s stimulus blitz delivered initial euphoria to the nation’s US$10 trillion ($13.41 trillion) stock market, for Lombard Odier’s Asia investment chief it’s what happened after that has him on edge.
The sweeping package unveiled two months ago has created a dilemma for advisers to the super-rich, John Woods said in an interview. The resulting stock surge after years of under performance had some chasing the rally on bets this time was different, while other have grown wary of similar head fakes.
“The risk is you get them in at the top and they give that back in the subsequent months following,” Woods, chief investment officer for Asia at the Swiss private bank, said. “For those who haven’t seen the movie, it’s a painful trade.”
After China’s stimulus package was announced, the nation’s CSI 300 Index surged more than 30% to a peak on Oct 8. It has since given up some of those gains as the prospect for Chinese stocks dims due to concerns over the country’s growth outlook and US President-elect Donald Trump’s tariff threats. The benchmark is still up about 14% this year.
“Until there’s a meaningful substantial focus on consumption, in our view, these stimulus measures are likely to be shorter term,” Woods said. “And the markets will respond in a very sharp and positive way before essentially retracing.”
At the end of 2023, Lombard Odier removed all standalone strategic allocations to Chinese assets and has kept only a limited exposure to China through its emerging market equity allocation, Woods said. Michael Strobaek, the firm’s chief investment officer, told Bloomberg News in late September that the move had worked “tremendously well.”
See also: China’s stock rally faces risk as retail enthusiasm seen cooling
Lombard Odier had total assets under management of 209 billion Swiss francs ($317.55 billion) as of June, of which the majority is private clients.
To be sure, there are still those who remain bullish. Man Group and abrdn Plc are counting on Beijing to deliver greater stimulus to offset Trump’s tariff threats.
China is an important market and “we can’t strip it away”, said Woods. “But there’s no explicit overweight through a particular sector or a separate country exposure.”
