A prominent Swiss private bank has made a bold move in its investment strategy, ditching all Chinese assets from its portfolio in favor of US equities, government bonds, and the dollar. The bank’s chief investment officer, Michael Strobaek, who joined the firm in November, made the decision to eliminate China holdings, citing concerns about the sustainability of the country’s economic stimulus measures.
The move, which was made despite China’s recent benchmark index surge, has paid off handsomely for the bank’s clients, according to Strobaek. The bank’s asset allocation, which determines how client funds are divided among stocks, bonds, and other assets, previously had a 6% allocation to China. That allocation is now zero.
Strobaek’s skepticism about China’s stimulus measures is not shared by all investors. Billionaire David Tepper, for example, has expressed enthusiasm for Chinese assets, while Stephen Jen of Eurizon SLJ Capital predicts a “serious rally” in Chinese stocks. However, Strobaek remains unconvinced, viewing the government’s intervention in capital markets as a negative sign.
Instead, the bank is advising clients to participate in the Chinese market indirectly, through Hong Kong stocks or equities related to Chinese exports. Having made gains on US stocks this year, Strobaek is now considering a pullback, citing high valuations. The bank’s next moves will involve reducing US equity holdings and increasing investments in emerging markets, excluding China.
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