BlackRock, with about $7.3 trillion in assets under management as of end-June, joins DWS Group and HSBC Holdings Plc in pointing to recent outperformance of Chinese shares as a reason to take some money off the table.
The MSCI China Index had rallied more than 40% from a March 19 low amid signs of economic recovery from the pandemic and cheer-leading from state-run media, before paring those gains in the past few days as the country acted to cool the speculative frenzy.
Gordon Fraser, co-head of global emerging markets equities at BlackRock Inc., began betting on stocks in countries such as India, Indonesia, Russia and Mexico, which have been among the worst hit by the pandemic, but with prospects to recover because of their “very flexible economies” and sustainable levels of debt, floating exchange rates and resilient populations.
“We’re still overweight in China. We’re not negative. We’re just more positive on other opportunities that have yet to enjoy economic improvement”, said Fraser, whose main $1.2 billion funds has beaten 93% of peers in the past three years according to Bloomberg-compiled data.
The reduction in exposure to Chinese stocks comes after Fraser increased the holdings during the January-February period even as the coronavirus raged through the nation.
Bernstein Quants Call China Momentum Stocks ‘Extremely’ Expensive. The fund manager also remains bullish on developing-nation equities because the asset class hasn’t outperformed its developed-market peers, bond yields remain low, and earnings look set to rebound.
Additional comments from Fraser:
Closely monitored risks include credit events in the US Such as rising defaults possibly having repercussions on emerging markets.
1. Brazil remains a caution with more challenging fiscal positions in energy markets but opportunities can be found in the energy and materials sector.
2. Observed profit by the company on telecommunication stocks and defensive sectors. Some exposure to Turkey was also trimmed due to economic trajectory in the next few months.
Taiwan and South Korean equities have outperformed and do not offer strong bottom-up opportunities.

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