“Net sales for Chinese funds, as a whole, have tended to follow the Shanghai Composite Index very closely, indicating that investors are fairly active in the market and respond quickly to changes,” said Britt Holland-Ellice, head of fund commercial at Cofunds.
She added: “It will be interesting to see what happens across the sector over the next few months, and how advisers play out the volatility, as markets continue to flatten. For now we stand by the assumption that new investment money is likely to stay closer to home.”
Cofunds’ survey of 192 financial advisers between 11-26 January 2016, showed nearly half of those polled are concerned about Chinese growth slowing and the associated downward pressure on markets. Moreover, more than half (51%) are worried about the impact of the Chinese government intervening in China’s stock markets.
The cautious outlook is further reflected by the fact that 15% of advisers plan to decrease their allocations to China in the year ahead. Only 2% of advisers taking part in the poll plan to increase their allocations to Chinese funds.
The research also revealed that 47% of advisers are “fairly pessimistic” about China’s economic growth over the next six months, while 45% believe the trading restrictions imposed by China were not the right measure to stabilise the market.
There is still a desire to invest in Chinese funds despite the current outlook for the region, however. Close to half said that while China is too volatile short term, it has growth potential long term to bounce back. A majority (58%) intend to maintain their current allocations to China over the next six months, while 14% are optimistic about China’s economic outlook.