Invesco chief executive Martin Flanagan said demand for investments in China among the $1.1tn fund manager’s clients has continued to grow despite slowing economic growth and a trade war with the US.
The strong sentiment in the face of trade tensions was one factor pushing the US investment management company to increase its stake in a China joint venture that is linked with payments conglomerate Ant Financial.
Gloomy economic prospects connected to hundreds of billions of dollars in tariffs levied by the US on thousands of Chinese goods raised concerns earlier this year that the country could experience higher-than-expected capital outflows as global investors reduced exposure to the world’s second-biggest economy.
In April and May, China’s stock market was hit by the biggest outflow of foreign capital on record as $12bn left the country, leaving it with only a net inflow of $8bn from the start of the year through to June.
But the results of a survey of Invesco clients and peers, covering more than 400 professional investors, showed that 80 per cent of participants planned to increase their exposure to China over the next year.
The high level of interest in increased exposure to China was frankly beyond my expectation
Only 4 per cent planned to reduce their exposure, according to the survey, which was carried out by the Economist Intelligence Unit for Invesco, which manages about $72bn in China-linked funds.
“It was surprising — [the survey] was done in August-September, when you would expect sentiment to be more negative with the trade war going on,” Mr Flanagan said. “The high level of interest in increased exposure to China was frankly beyond my expectation.”
Tensions between the US and China have eased since the survey was taken. Beijing said on Thursday that the two countries have agreed to remove some tariffs, in the latest sign that a truce could be in sight after months of hostilities.
As the trade war has raged on this year, Chinese regulators have taken a number of measures to make it easier for investors to access the country’s large equities and debt markets. In September it scrapped a quota system for foreign institutional investment, allowing fund managers to buy up stocks and bonds without a hard limit.
Asset managers also will soon be allowed to buy out their China joint venture partners and own 100 per cent of their companies.
Invesco plans to increase its share in a joint venture it has with Great Wall Securities from 49 per cent to a majority stake. However, Mr Flanagan said it has no plans to take a 100 per cent stake in the company and will maintain its partnership with the Chinese company.
The Shenzhen-based joint venture is linked up with Ant Financial, the financial arm of ecommerce group Alibaba. Through the partnership, Invesco had brought in $14bn in funds under management as of May this year after establishing the tie-up last year.
As Invesco grows in China, it is cutting staff in the US. In October the Atlanta-based investment manager said it was cutting 1,300 jobs, many of which were let go from OppenheimerFunds, a smaller rival it bought earlier this year.