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News & Insights | 6th March 2025
Market Analysis
3 Min Read
THIS ARTICLE WAS ORIGINALLY PUBLISHED BY NEW MODEL ADVISER ON 5th MARCH 2025
London advice firm and wealth manager Connor Broadley has increased its portfolios’ China exposure in recent days as Chris Wyllie, its chief investment officer (CIO), cautiously anticipated ‘a changing story’ in the country.
The NMA Top 100 firm, which has £154m in its managed portfolio service (MPS) and £650m overall, bought into the HSBC MSCI China UCITS ETF earlier this year, and has further increased its exposure in recent days. The fund now represents around 25% of the firm’s emerging markets exposure for its DIS.
But Wyllie is not counting his chickens just yet. ‘We’re not sure whether we’re owning this position or renting it,’ the CIO said.
China has disappointed investors in recent years after what Wyllie called a series of ‘false dawns’.
A capricious regulatory regime and sluggish growth has hurt investor confidence, while September’s market rally was checked by the looming threat of Donald Trump’s imposed tariffs on Chinese exports.
While he remains circumspect on strong performance so far this year, Wyllie believes an encouraging picture for China is starting to build.
‘China has shown up as very, very cheap on our valuation screens for quite some time,’ he said. While ‘in China, valuation is not enough’, Wyllie decided that now is the time to ‘reinitiate a position in Chinese equities’ on changing buy signals.
Sino-American trade deal possible
Wyllie spoke to Citywire just as Trump unexpectedly announced the US would levy an additional 10% tariff on imports from China – a move that added fuel to China doubters’ fire.
But he thinks that interactions between Trump and Chinese President Xi since the former’s election bode well for economic co-operation between the two superpowers and could even lead to a trade deal.
‘[Trump] has been quite complimentary about Xi Jinping, and he did invite him to his inauguration,’ Wyllie said. ‘I think that hints potentially at that big prize for China. Trump could surprise everyone by doing a big trade deal – a grand bargain with China.’
Indeed, Wyllie is not flustered by the latest tariff news: ‘An awful lot of tariffs have already been imposed on China, and the analysis is that the impact from here of further tariffs is probably going to be pretty small.
‘The incremental approach to China tariffs is certainly not shock and awe, and could suggest a deal further down the line.’
CCP’s push for growth
Promises that Chinese equities were on the point of rising from the ashes failed to translate into returns before, and Wyllie is wary that the latest breakout ‘could be like other head fakes we’ve had in the past’.
‘On another occasion, we did have a go at bottom-fishing Chinese equities, but we had to cut that position because it faded and just wasn’t working,’ he said.
The decision to allocate to an ETF rather than an investment trust or open-ended fund was made partly because of liquidity concerns and the knowledge that Connor Broadley might have to trade out of the position ‘quickly’.
The HSBC market cap-weighted tracker includes heavy weightings to tech companies such as Alibaba, Tencent, and Xiaomi, and at this stage Wyllie favours it for its ‘generic, broad bush exposure to Chinese equities’.
Xi met with the heads of those companies and others in a rare and highly publicised meeting last week, in which he said now is ‘the right time for the majority of private business and entrepreneurs to show their talent’.
The meeting was seen by markets as a positive signal, and Wyllie agrees. ‘We’re back to the situation where [the Chinese Communist Party] see their tech sector as national champions.’
Fears remain, however, about the unwieldy size of China’s corporate and public debt pile – Wyllie warned that the central government’s move to shift debt from local government balance sheets is akin to ‘just sweeping the dust from under one carpet to another’.
