•   
  •   
  •   

World How to avoid China in your portfolio

22:05  22 november  2021
22:05  22 november  2021 Source:   cnn.com

Critics say McKinsey's work for both Chinese companies and Pentagon poses potential security risk

  Critics say McKinsey's work for both Chinese companies and Pentagon poses potential security risk McKinsey in recent years has faced accusations of alleged conflicts of interest in its bankruptcy work and other fields.McKinsey’s consulting contracts with the federal government give it an insider’s view of U.S. military planning, intelligence and high-tech weapons programs. But the firm also advises Chinese state-run enterprises that have supported Beijing’s naval buildup in the Pacific and played a key role in China’s efforts to extend its influence around the world, according to an NBC News investigation.

The Chinese economy presents some unique challenges for investors. On one hand, China is home to several of the most dynamic and rapidly growing companies on the planet, such as electric car makers Xpeng and Nio as well as privately held TikTok owner ByteDance.

Workers install the nameplate of the Beijing Stock Exchange on the Financial Street in Beijing, Sunday, Nov. 14, 2021. © Andy Wong/AP Workers install the nameplate of the Beijing Stock Exchange on the Financial Street in Beijing, Sunday, Nov. 14, 2021.

But China's recent crackdown on the tech sector has slowed earnings momentum at big brand name firms including Baidu, Alibaba and WeChat owner Tencent.

Continued human rights concerns, brought to the forefront once more following questions about the safety of tennis star Peng Shuai, are also a problem for some investors.

China hails Xi and Biden talks, after year of growing strain

  China hails Xi and Biden talks, after year of growing strain BEIJING (AP) — China on Tuesday hailed a virtual meeting between President Xi Jinping and U.S. President Joe Biden, saying they had a candid and constructive exchange that sent a strong signal to the world. The positive description of the meeting came in sharp contrast to heated exchanges between the two nations earlier this year. The talks appeared to mark what both sides hoped would be a turnaround in relations, though major differences remain. © Provided by Associated Press In this photo released by Xinhua News Agency Chinese President Xi Jinping, fourth from right waves as he greets U.S. President Joe Biden via video link from Beijing, China on Tuesday, Nov.

So can (and should) you avoid the world's second largest economy? Some experts think that's exactly what investors should be doing.

"Investors have underestimated autocracy risk," said Perth Tolle, sponsor of the Freedom 100 Emerging Markets ETF, a fund that has no exposure to Chinese stocks.

"You can't always factor in the risk of a government coming in overnight and saying to a company 'you can't really make a profit,'" she said.

Tolle told CNN Business that investors should be more concerned about capital flowing out of the country due to worries about Beijing exerting more control over companies in mainland China.

That's why her fund has more exposure to other markets such as Taiwan and South Korea instead of China. Taiwan Semiconductor and Samsung are two top holdings in the FRDM ETF.

Taiwan Could Be First Domino in Chinese Land Grab Across Asia

  Taiwan Could Be First Domino in Chinese Land Grab Across Asia Experts discuss with Newsweek what would happen next if China invades Taiwan.After Texas Senator John Cornyn warned Congress this week that a hostile takeover of the democratic island—and its 23.5 million people—would be the first step in the China's quest for world supremacy, experts discussed with Newsweek wider implications for the United States and a postwar Asian regional order that has held for more than seven decades.

Emerging markets funds doing better without China exposure

Tolle isn't the only one screening out China from emerging markets funds. Big fund companies such as iShares and Columbia Threadneedle also have emerging market ETFs that leave Chinese companies out of their holdings.

The funds have outperformed broader emerging markets funds this year, too, showing that investing for social good can be profitable.

The FRDM ETF, as well as the iShares MSCI Emerging Markets ex China ETF and Columbia EM Core ex-China ETF, are each up between 6% and 8% in 2021.

That's compared to a 2% drop for the broader iShares MSCI Emerging Markets ETF, which owns Tencent, Alibaba and Chinese food delivery service Meituan as top holdings.

Other investing experts argue that Chinese president Xi Jinping's recent push to crack down on big tech firms is not a good sign for earnings in the short-term.

China Backs Down in South China Sea After U.S., Philippines Warnings

  China Backs Down in South China Sea After U.S., Philippines Warnings Philippine Defense Secretary Delfin Lorenzana said China promised not to intervene in its resupply missions to Second Thomas Shoal—part of a disputed archipelago.Philippine Defense Secretary Delfin Lorenzana told reporters on Sunday that "the Chinese will not interfere per my conversation with the Chinese ambassador." He was referring to Beijing's envoy in Manila, Huang Xilian, who received a formal diplomatic protest from the Philippine government last week.

"We like the longer-term view, but in the near- term, we're more cautious," said Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management. "Some other emerging markets have better growth potential."

"The move from promoting more entrepreneurship to an equal growth sharing of the pie changes the equation," he added. "We took some money off the table and reduced our exposure to China."

Another portfolio manager argued that trying to predict which companies or sectors will come under the "Xi Jinping thought sphere of influence" makes investing there a challenge. Major Chinese education stocks have taken a hit this year as well due to regulatory concerns.

"The investor perception of risk has risen in China, and it has risen with cause," said Paul Espinosa, portfolio manager with Seafarer Capital Partners.

Espinosa also said China isn't as attractive as other emerging markets simply because stocks outside of the country are better bargains.

Companies in Brazil and others parts of Latin America are more compelling values than Chinese-based firms, Espinosa said. He's also looking at investment opportunities in the Middle East.

"Everyone is so focused on China, and it is dominated by growth investors," he said. "But there are more opportunities outside of China."

China Media Says U.K. Still in 'Colonial Days' as Navy Enters Contested Waters .
The U.K.'s Queen Elizabeth Carrier Strike Group sailed into the South China Sea on Monday, making a port call in Singapore.In separate op-eds on Sunday and Monday, the newspaper accused Britain of wanting to "revive its past glory" and warned the country against sailing warships into "Chinese territory.

usr: 2
This is interesting!