Asset allocators have all eyes on China

The medium term outlook for global equities is dependent on the extent to which China’s economy is able to decouple itself from a US slowdown, the Australian Super Investment Conference at Port Douglas heard yesterday.

The ability of China to keep growing despite a US downturn, according to ARIA chief investment officer Alison Tarditi, would depend on its moving past the export driven phase of its resurgence, perhaps revaluing its currency and encouraging more domestic spending. From an asset allocation perspective, Tarditi suspected it was time to “;preserve capital”; in light of the recent bursting of what she called the “;financial innovation bubble”;, or FIB for short. She recommended downweighting equity risk elements. Among the asset classes she was beginning to favour, Tardity mentioned traditional fixed interest instruments such as treasuries and inflation linked bonds, unleveraged direct property, and private equity investment into genuinely distressed companies. Of the equity markets, Tarditi hinted at a preference for emerging markets. “;Developing markets have been capital exporters, so they are best placed to weather an environment where capital is getting more expensive.”;