George Efstathopoulos, Fidelity International’s Singapore-based money manager, is increasing his exposure to Chinese stocks once again, betting on fiscal stimulus to support the economy. Having already profited from China’s stock rally in late September, Efstathopoulos, who oversees about $3 billion in assets, rotated into mid-cap shares on the mainland last week, shifting away from his previous Hong Kong positions. His focus is on the CSI 500 Index, which has underperformed compared to the blue-chip CSI 300 this year.
In an interview last week, Efstathopoulos expressed confidence in China’s ability to stimulate domestic growth. “Chinese authorities have the ability and they’ll do what they need to do to make sure that domestic growth is decent,” he said. He also highlighted that onshore stocks are “more immune” to geopolitical events, and mid-cap stocks are likely to benefit more from any stimulus measures implemented by the government.
This optimistic outlook contrasts with some Wall Street strategists who have become more cautious on Chinese equities, particularly following Donald Trump’s election win and a less-than-expected fiscal response. Efstathopoulos, however, believes that China’s policymakers have enough room to maneuver, especially if the U.S. president-elect’s tariffs materialize.
The volatility in Chinese stocks this year has created opportunities for Efstathopoulos. After a steep drop in early 2023, Chinese stocks surged in late September when a monetary stimulus package boosted the CSI 300 Index by 32% in just six trading sessions. Efstathopoulos capitalized on these market movements, initially increasing his China stock exposure to 4% of his portfolio over the summer, then cutting it back to 1% during the September rally. His recent purchase of mainland mid-cap stocks has brought his China exposure back to around 3-3.5%.
Efstathopoulos manages Fidelity’s global multi-asset growth and income fund, which has returned 9.5% over the past year. The fund aims for an annual return of 7-9% over the cycle.
To make these China bets, he has been using derivatives such as contracts for difference, replacing his earlier positions in Hang Seng China Enterprises Index futures.
Despite a recent loss of momentum in the Chinese stock market since its peak on October 8, as Beijing focused more on addressing debt concerns than stimulating consumption, Efstathopoulos remains optimistic. The latest economic data has been mixed, with retail sales improving but deflationary pressures continuing, while tensions with the U.S. are expected to escalate under Trump’s administration.
Efstathopoulos sees Beijing’s approach as prudent, suggesting that the government is waiting for more clarity on the potential impact of tariffs before deploying additional fiscal stimulus. He also pointed out that China has diversified its export channels more effectively than during Trump’s first term.
“If domestic consumption responds positively to fiscal stimulus, the CSI 500 is likely to be the biggest winner,” he concluded, reaffirming his belief in mid-cap stocks as key beneficiaries of any future stimulus efforts.
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