SINGAPORE: Many investors have cut ties with China in 2020. But a billionaire hedge fund manager has a strategy that starts with “balance”.
“The way to play the Chinese market is to build a diversified portfolio first,” Ray Dalio told CNBC’s “Street Signs Asia” on Wednesday.
That, he said, means achieving the right kind of wealth balance in China. “Our approach is that we call it an all-weather approach. It’s a fixed balance in which you can achieve balance without reducing the expected return. Out of that, you want to make a strategic move.”
Dalio said the Chinese yuan could see higher consumption outside of China as the weak economy has hit the US dollar and other large reserve currencies. He said China’s interest rates are attractive, and the growth of its capital markets has helped strengthen the exchange rate for the yuan.
Ray Dal Leo, billionaire and founder of Bridgewater Associates.
David Paul Mori | Bloomberg | Getty Images
“You will see more of this in the interior [yuan]“And this is a natural consequence because there are going to be challenges in talking and large reserve currencies that we are talking about, there will be some element of void,” said Bridgewater Associates co-chairman and co-chief investment officer.
The onshore yuan has strengthened against the US dollar in the last six months, rising from a high of 80. above in the recent week to close to 80. near. Analysts say the yuan’s strength is due to both the weakness of the greenback and China’s economic recovery from the coronavirus epidemic.
Dalio warned that the “strategic move” would change over time.
“And of course it’s based on change, wealth, classes and its relative prices. But first … get exposure, I also believe in those markets and currencies,” he said.
The main indicators in China behind years of improving economic data and the recession in the coronavirus case are years old.
India’s potential
Like China, Dalio said he believes India has great potential but lags behind in the development of its capital markets.
“Those markets have much less liquidity, much less developed,” he said. Dalio explained that the country has many investment opportunities in terms of advanced technologies and entrepreneurship. But it’s “hard to invest.”
“If there was more growth in the capital markets, more liquidity, more openness in the markets, which would revive entrepreneurship,” he added, adding, “Being able to raise money that way and disseminate money more efficiently. The road will revive the Indian economy.” . “
Unlike China, where the epidemic seems to be under control, India is struggling to reduce its infection and related deaths. Currently, India lags behind the United States alone in terms of infection levels, with more than 6.6 million people infected and 103,000 dying.
The nationwide lockdown from late March to May has slowed India’s growth and economists say the path to sustainable recovery is difficult. Nevertheless, the stock market has bounced back from its March lows and has remained relatively flat year-to-date. The rupee has also strengthened from around 77 to close at 73 against the dollar.
.
