Spotlight on Colin Liang, Portfolio Manager-Redwheel China Equity Fund & Head of China Research, Redwheel
Global Thought Leader Spotlight
Colin Liang, Portfolio Manager - Redwheel China Equity Fund & Head of China Research; Redwheel Emerging & Frontier Markets Strategies, Redwheel
“In my role as the Portfolio Manager of the Redwheel China Equity Fund I am responsible for managing a concentrated, China-only equity portfolio and leading the six-person China research team within Redwheel’s 24-person Emerging and Frontier Markets investment team. The team employ a flexible index-agnostic approach to investing, combining top-down, thematic and bottom-up research to identify attractive GARP opportunities with significant tailwinds.
“Since 1Q 2022, China has moved from a tightening cycle to a loosening stance which is in sharp contrast to the tighter stance seen elsewhere in the world. Both monetary and fiscal policy appear to have found a bottom while regulatory headwinds across several sectors, including internet-related companies, have tapered. In contrast to previous cycles, this round of loosening is not driven by liquidity which benefits all sectors. A more balanced approach has been used with selective growth areas profiting (e.g. renewable energy, automobiles, semiconductors) while stimulus is limited to an as-needed basis for other parts of the economy (e.g. property, infrastructure, telecom).
“The economic recovery has been disrupted by Covid outbreaks and subsequent lockdown measures implemented by the Chinese government. An ill prepared medical system coupled with poor execution from local governments led to a drop in economic activity and consumer confidence earlier this year. Even though ‘Zero-Covid’ still holds, we believe that the majority of supply chain disruptions are now behind us and a full opening is possible in 1H 2023.
“Over the long-term, Chinese equities as an asset class have many tailwinds. It’s a deep market that is increasingly being institutionalised. Structural inflows are being driven by global index inclusions and a shift in domestic households’ asset mix. The low correlation of Chinese equities with other equity markets is an attractive feature which also helps to bolster the case for the asset class.
“Regulatory turmoil since July 2021 raised questions on the overall investability of Chinese equities; however, we would argue that this has just increased the importance of how to invest in China and that this is the right time to add back China exposure both for near and long term outperformance. Conflict between the US and China will likely persist for the foreseeable future without any major change in the status quo and while headlines around geo-politics tend to impact markets in the short-term, they also present mid-to-long-term opportunities.
“China’s policy cycle has fluctuated over the last decade under President Xi. Avoiding a linear extrapolation of China’s Zero-Covid policy, the internet sector and the property sector remain important for investors in the Chinese equity market.
“China’s current easing cycle is not benefitting all sectors equally and certain growth areas stand out against traditional ex-growth sectors. For example, global champions are now emerging in the electric vehicle supply chain, renewable energy, and technology sectors amongst others.
“Chinese equities feature a high return dispersion making it a fertile ground for skilful stock selection strategies with less dependence on macroeconomic considerations or timing market beta. Given the additional tailwinds of structural inflows, China has the potential to become a significantly larger part of global equity portfolios, including a stand-alone allocation, over the next decade.”
Colin presented on the growth opportunities re-emerging in China equities at Global Investment Institute’s 2022 Equities & Growth Assets Investment Forum, which took place on Wednesday, 7 September 2022 at the Westin, Melbourne CBD, Victoria.
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Colin Liang, Portfolio Manager-Redwheel China Equity Fund & Head of China Research, Redwheel
Colin leads the China research effort, manages a China focused portfolio and is a member of the Investment Committee for the Redwheel Emerging and Frontier Markets Strategies. He has 16 years of experience in investment and financial analysis, most recently at NN Investment Partners (ING Investments) where he was a portfolio manager responsible for investments in Greater China. Previously, Colin was an investment analyst at SeaTown Holdings and equity research analyst at Bank of America Merrill Lynch. He holds a Master of Finance degree from Lancaster University in the UK and a Bachelor of Economics degree from Tongji University in China. Colin is a native Mandarin speaker.
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