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BlackRock global emerging markets, Asia and China active equity range

Understanding our range

BlackRock provides a range of broad and regional equity strategies managed with both fundamental and systematic approaches.

Led by Andrew Swan, head of global emerging markets (GEM) fundamental active equities, BlackRock’s range of funds spans the entire reach of the global emerging markets and Asian regions, including a number of funds focused solely on China. Within China, we offer both onshore and offshore strategies.

Through our diverse range of funds, we hope to be able to offer a fund for many investor portfolios.

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While global emerging markets have often ranked among the most significant contributors to global growth, investors have been underweight the asset class due to its sensitivity to foreign exchange volatility, commodity price swings and macroeconomic or geopolitical headwinds.

Yet the past few years have seen an upturn in fortunes for the emerging market economies, with improved balance sheets at sovereign and corporate level, better allocation of capital and a greater alignment with shareholder interests.

Watch to find out more about the BSF Emerging Markets Equity Strategies Fund, and how the team goes about investing in emerging markets.

Spanning 14 countries and currencies while going through profound reform at varied pace, Asia can no longer be seen as a homogenous investment opportunity.

While the extremes of volatility often seen in the region warrant a certain investment appetite and have kept investors at bay, we think we are now at an attractive turning point.

After several years of stagnation, earnings from Asian companies are finally picking up. This, coupled with the broader global economic recovery, presents a broad, optimistic environment in which suitable investors can delve.

China is a market of opportunities. Backed by the world’s largest population, the second-largest economy and an increasingly sustainable growth path, we believe Chinese equity markets present a rich hunting ground for investors looking to gain exposure to the structural changes of the Chinese economy.

Dynamic, vibrant and now more accessible than ever before, we believe Chinese equities offer investors an attractive opportunity to invest in the transformation of this huge country.

Stepping up change

As China grew to become the world’s second largest economy after the U.S., foreign investors often struggled to benefit from the country’s full range of growth opportunities. This story is changing quickly, as policymakers seek to liberalise access to Chinese stock and bond markets while making them more squarely aligned with international standards. This has material implications for all investors, whether individuals or large, sophisticated institutional investors. Much is changing in China, and the cost of ignoring this emerging opportunity might prove too high, especially over the longer term.

Foreign investors’ holdings in China
(as % of onshore market)

investing in onshore china

Sources: Wind, as of March 2019. Foreign holdings of onshore equity & bond are estimated based on QFII holdings and bond holdings via CIBM Direct until 2013, and based on PBoC’s disclosure of foreign holdings of equity/bond starting from 2014.

Bond buyers welcome

The ascension of China’s bond market has largely lacked foreign participation – only about 3% of the US$12 trillion market is in foreign hands. This is poised to change relatively quickly, underpinned by better access channels and greater alignment with international standards.

As of April 2019, the Bloomberg Barclays Global Aggregate Index, a major tracker of global bond performance, added Chinese sovereign and bank policy bonds to its mix. We estimate the inclusion could bring at least USD150 billion inflows from overseas, just from rebalancing passive strategies tied to this benchmark over the 20-month inclusion period (ending November 2020). At the current market value, this would represent about 6% of the global index. Our estimate could be conservative, especially if China’s bond market, already the second biggest in the world, maintains its current growth path. Also, this estimate does not reflect likely inflows from active strategies, which could be significant but are harder to predict.

A quality equity decision

The onshore Chinese equity market is becoming increasingly hard to ignore for investors. With more than 3,000 listed companies, A-shares, which are listed in Shanghai and Shenzhen, give investors access to what has been relatively isolated market historically. Eased restrictions and continuing market liberalisation now mean international investors can trade A-shares and manage liquidity easily through the Stock Connect program without the hassle of going through the previous quota program.

Supporting the transition of China A-shares from a “nice to have” to a “need to have” asset class is the ongoing inclusion in major indices by key global providers. In 2018, MSCI started including A-shares in their indices. FTSE is set to follow suit and MSCI have announced a significant increase in their indices’ exposure to weights of A-shares for later this year. In many cases, A-shares are the only option for investors to gain exposure to quality Chinese companies with sustainable business model, low sensitivity to policy cycle, and high growth potential from consumption upgrading and technology advancement.

Why BlackRock for China

To help discover the opportunities these changes provide, you need a trusted partner who is not only an expert on China but can apply their knowledge, expertise and judgement in creating portfolios that can deliver the best of Chinese markets to you. BlackRock’s large and experienced team can provide you with a truly differentiated perspective on China and our breadth of solutions across active and index strategies give you a multitude of ways to access the market.

Key to our approach

The total product range now represents more than USD 25bn of assets under management (AUM) and is supported by a total team of 40 investment professionals, who conduct over 4,000 company meetings per year. The average experience of our portfolio managers is 12 years. Our expertise across three regions is rooted in local, on-the-ground knowledge from our well-resourced teams, complemented by cutting-edge technology, proprietary risk management systems and long-standing, broad and deep access to company management.

While our teams do their best to share ideas, cross-reference and challenge each other’s thinking, and leverage the size and scale of BlackRock, investment strategies can never be guaranteed. While proprietary technology platforms may help manage risk, risk cannot be eliminated.

Source: BlackRock as of end February 2018.

Meet the portfolio managers

 

Andrew Swan

Andrew Swan
Managing Director

Emerging markets

 

Sam Vecht

Sam Vecht
Managing director

Gordon Fraser

Gordon Fraser
Director

Emily Fletcher

Emily Fletcher
Director

Stephen Andrews

Stephen Andrews
Managing director

Asia

 

Oisin Crawley

Oisin Crawley
Managing Director

Alethea Leung

Alethea Leung
Director

China

 

Shen Jeff

Jeff Shen
Managing Director

Rui Zhao

Rui Zhao
Director

BlackRock as at June 2018, subject to change.