Blog India overweight, China biggest risk

India overweight, China biggest risk
AIC attendees voted on a range of financial topics – see the results

Over 3,500 participants (70% of them C-suite executives) representing some 300 corporations from 45 countries and US $18 trillion in assets under management are attending the four-day AIC, which opened Tuesday April 5. Speaking at the event are 130 government, business, academic and civil society leaders from around the world.

In voting that preceded the plenary panel discussion, 37% of those attending the packed session identified Asia ex Japan as the region that they expect will provide the greatest upside in US dollar terms for equity investors in 2016. The US came in second at 28%.

Asked to choose one market in the Asia Pacific region where they are overweight in their investments, 18% chose India, almost 15% picked Australia, 14% selected China (H shares), and nearly 11% went with Hong Kong.

For the Asia Pacific market where they are most underweight, over 17% identified Pakistan, 14% Japan, almost 13% China (A shares), and 12% Malaysia.

Growth plays dominated when participants indicated the sector in the Asia Pacific region in which they are most overweight. The top five choices were healthcare (16%), Internet (15%), consumer discretionary (13%), technology (11%), and financials (9%). Industrials and transportation ranked at the bottom, each with less than 1% of those polled.

Participants also revealed the sector in which they are most underweight: financials (21%), energy (15%), materials (13%), property (12%) and gaming & lodging (10%).

Where do participants expect the MSCI Asia Pacific Index (up 5% to date) to be at the end of the year? The responses were cautious, with 43% expecting the index to remain flat and 39% predicting a rise of between 10% and 20%.

Presented with a list of seven risks and asked to pick what they regarded as the biggest two, 55% of participants in the session chose China (growth and currency risks), 36% geopolitical issues, 32% rising debt defaults, 19% competitive devaluation, 19% US monetary tightening, 15% the “Brexit” or exit of Britain from the EU, and 14% the US elections.

Focusing on the China currency risk, participants were prompted to predict where the USD/CNY exchange rate (6.48 as of 1 April) would be by the end of 2016.  Again, caution prevailed, with 68.5% picking a range of 6.5 to 7.0.