Opportunities abound in Chinese tech despite US tensions
The opportunities in Chinese technology are unlikely to be hindered by regulatory pressure from US President Biden, according to VanEck and Principal Global Investors.
The country recently concluded its National People’s Congress and Chinese People’s Political Consultative Conference and a focus was given to the country’s push for independence of science and technology innovation.
It hoped to grow expenditure on research and development in this space by 7% in the next five years, particularly in areas like artificial intelligence, 5G and quantum computing.
Alice Shen, senior associate-investment and capital markets at VanEck, said: “There are many investment opportunities in the growing IT sector, including both companies listed domestically and offshore as China continue to invest in research and development over the next decade”.
But Seema Shah, global chief markets strategist at Principal Global Investors, said the election of President Biden to replace former President Trump would have been unlikely to stem the tensions between the two nations. However, he would be more likely to strike a balance between economic and security interests.
“President Biden’s plans will involve striking a more careful balance between economic and security interests, relying on multilateral levers to gain support from core allies, particularly the European Union, Japan and India. Building this alliance will not be easy. Most countries would prefer not to have to choose between the world’s two largest economies,” Shah said.
“Moreover, given how critical technology is for both economic growth and military capacity, there is unlikely to be a substantial easing in US intentions to slow the pace of China’s technological development.”
Shen highlighted three particular areas that VanEck was exploring which were cloud computing (via tech giant Alibaba), communication and semiconductors.
“The growth in 5G applications would accelerate in downstream sectors such as vehicle-to-everything, industrial internet of things, computer vision, and the consumption supply chain,” she said.
“With the global chips shortage, Chinese semiconductor producers might benefit and potentially be a catalyst for switching from imports to locally manufactured ones.”
The best-performing China fund within the Australian Core Strategies universe over one year to 28 February, 2021, was Premium China which returned 31.5%, according to FE Analytics. This compared to average returns of 16% by the Asia Pacific single country sector.
AUTHOR
Laura Dew
Recommended for you
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
Responsible investment performance concerns have lessened as the market hits $1.6 trillion in AUM, according to RIAA’s annual report, but greenwashing fears among asset managers are on the rise.
