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Zurich CIO: why I'm boosting Asia allocations amid EM sell-off

Zurich CIO: why I'm boosting Asia allocations amid EM sell-off

As emerging markets slid into bear territory last week, Bellecapital CIO Mathias Heim told Citywire Switzerland that he's continuing to increase his Asia allocations.

Bellecapital launched a Vietnam fund in June, diving into a region that has recently been hit by an emerging markets sell-off. However, Heim said he believes pulling out of emerging markets is riskier than sticking it out.

He said: 'Emerging markets are diverse in themselves. Speaking about Asia, I think it's a risk not to be invested. If you look where growth is coming from on a global basis and in the long run, according to the IMF more than 50% of GDP growth comes from Asia. Not being invested at all is the risk.'

Heim said his team has increased its Asian equity allocation from 20% to 25% over the past three weeks and will continue to boost exposure over the months to come.

'We're very positive on Asia, especially on China. Given the hiccup we have right now on the political side, along with contagion fears, we think it opens up an opportunity for long-term investors.

'The risk premium has gone up, valuations have come in and if you have a five- to seven-year horizon you should have better than average returns,' he said. 

He also believes that investors who capture emerging market returns through European companies are not accessing the highest growth rates possible.

'You can argue that you can capture growth via European and US companies, but what we see more and more, especially in China, is that as the Chinese economy moves from an export/infrastructure model into a consumer growth model, that consumer growth is increasingly being captured by local companies.'

Heim also noted that he expects emerging markets to find more stable growth over the next five to 10 years, and that volatility will come down.

Mathias Heim appeared on the May 2018 cover of Citywire Switzerland alongside Bellcapital CEO Beat Bass.

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