发布:2017-11-13 15:34 来源: 《中国betway体育官网》2017年第18期 作者:钟伟


Asset Allocation in a New Economic Environment


By Zhong Wei


There has been considerable debate in China as to whether the economy has turned the corner or entered a new cycle. As background to this debate,it is clear that there have been some significant changes in China and the rest of the global economy since 2015.


The global economy is certainly stabilizing but growth remains weak. In late 2014,as the global economy continued to find its footing,the Federal Reserve announced it would withdraw from its innovative policy of quantitative easing. Economies that were widely seen as being in particular trouble started to show significant improvement. These included Russia and Brazil last year as well as the eurozone and Japan this year. This is partly due to the fact that amid a lack of momentum in global innovation,growth has improved,largely due to what we could classify as statistical regression,or a return to more normal levels. In China,the economy had been showing a steady slowing since the third quarter of 2010,but that trend has changed,and there are clear signs of an overall economic improvement.


As the world's major economies post better growth,they have left their deflation problems behind. Yet inflation is still not a significant threat. A stabilizing of retail spending and commodity prices coupled with a generally modest recovery of resource prices means that there is still no need to sound the alarm over a potential rebound of inflation. China has emerged from a prolonged period of deflation -- one that was actually worse than that after the Asian crisis in 1997-1998. And in China the pace of inflation is also moderate.


Monetary authorities around the world are now withdrawing the innovative stimulus measures rolled out to counter the global crisis. Economic growth and inflation in the United States and Europe remain lower than expected,and the Federal Reserve is proceeding cautiously with its plans to raise interest rates and shrink its balance sheet. The European Central Bank has been similarly careful in unwinding its policies of quantitative easing. Given that China's economic growth has dropped from above 10% to a range of 6% to 7%,and retail prices have slowed from 3% to 1% to 2%,a significant slowdown in money supply growth is inevitable. China is no longer stressing the need for strong economic stimulus,and it is making use of strict controls on the finance and real estate sectors.


The path to greater coordination between the real or underlying economy and the financial sector is a growing challenge. This is especially true in the area of asset prices in the major economies. China may have some ideas these key economies could borrow,notably Beijing's new development concept featuring "innovation,coordination,greenness,openness and sharing." This concept is already gaining traction.


Whether we are seeing a new cycle or just a drawn out Juglar cycle (named after the French economist Clement Juglar),China and other economies are already on a new level as compared with the days around the time of the subprime mortgage crisis a decade ago. With this kind of macroeconomic foundation as a starting point,we can discuss how to adjust asset allocations.


China’s equity assets are a value pool and we should be patient about the payoff. China's stock market has not shown significant improvement since the subprime mortgage crisis. The stock markets of the United States,Europe and Japan all have higher valuations. The situation in China at the moment,in terms of where we are in the economic cycle,the level of equity values and market sentiment,is very similar to that of 2004. Many people are still asking where the domestic reform program has gone. In fact,the reform program is actually demonstrating a change in its very concept. We are shifting from the encouragement of economic stimulus to the discouragement of stimulus. Reforms now refer to supply-side structural changes that will improve the efficiency of the real economy. These include reducing the number of enterprises under the central government to 98. To be sure,reforms are under way. But this kind of innovation carries an economic price. Results may not be apparent at first. For the Chinese A share market,there is a need for greater patience mixed with confidence in eventual success.


If equity assets deserve greater attention in the allocation of our investments,our focus might be turned to those areas that are affected by the reform of state-owned enterprises,the upgrading of consumer tastes and innovative growth. The most promising area might be in reforming state-owned enterprises. There is a bigger probability of achieving success in such reforms than in innovative growth,where the failure rate could be relatively high. In the meantime,we could also see strong growth in cyclical stocks such as resources,financials and property while railroad stocks could also be big beneficiaries of rotational investment.


Liquidity is critical to investment allocation. For that reason,traditional corporate bonds and convertible bonds may be better than debt that carries deferred interest. As the real economy gradually improves,the central bank will be promoting more transparent and reliable liquidity levels. And in terms of liquid renminbi assets,trust investments without a guaranteed principal may be better options.


Renminbi and US dollar investments may be better choices than other currencies if we consider interest rates and exchange rates. Although the renminbi remains weaker than the euro,it has been on a somewhat firmer track. If we do not encounter any new crises,renminbi quasi-cash assets may be better than gold and will no doubt be better than deferred interest debt.


As for real estate,the boom might be over. After the subprime mortgage crisis,the Chinese property market experienced a sharp increase. But as of today,the real estate sector has undergone a major adjustment. Regional markets have shown sharp divergences,with some markets performing well and others still sluggish. At present,skyrocketing prices are evident in key cities and in core areas of a few smaller cities. This has also been favorable to those wealthy enough to have an apartment in a metropolitan area. They still have an opportunity to trade up. There has also been a further concentration of the market,with bigger firms gaining ground. At least through the year-end,the leading property shares will have a strong performance.


China's economy has reached a new level and that makes us more optimistic when we look at the transformation of growth that is under way. As far as asset allocations are concerned in this environment,it is preferable to stick with equity and quasi-cash,while there is also some room for growth in prices of real estate in first-tier cities. The reforms of state-owned enterprises,consumer product upgrading and innovation growth are good guidelines for future investment.


The author is associate editor of China Forex and associate professor at the department of finance at Beijing Normal University.