Chairman of abrdn’s Chinese investment vehicle blames ‘zero-Covid-19’ policy for collapsing returns
The chairman of abrdn’s Chinese investment vehicle has pinned collapsing returns on Beijing’s controversial ‘zero-Covid-19’ stance and geopolitical woes.
While the country is still considered to have significant growth prospects in the long-term, returns on assets in the country have plunged 23 per cent in the six months to 30 April, reversing a nearly 19 per cent growth in returns in the year to October 2021.
The value of Chinese assets has also dwindled in recent months, falling £77.3m since 31 October, despite abrdn’s investments being in some of the country’s largest businesses.
Chairman Mark Hadsley-Chaplin noted that regulatory upheaval, alongside property and energy troubles, have also weighed on markets, bruising the potential returns in abrdn’s investments, which include tech giant Tencent, JD.com, e-commerce giant Alibaba and online services platform Meituan.
But the potential delisting of US-listed Chinese firms over auditing requirements has further dampened activity, as a geopolitical storm continues to brew between China, the US, the UK and Russia.
In a joint statement today, Hong Kong investment managers Nicholas Yeo and Elizabeth Kwik added: “Investors were buffeted on many front, both domestically and globally. A flare-up of Covid-19 cases in December, albeit amounting to a relatively low number of reported infections versus outbreaks in Western societies, saw lockdowns imposed first in Xi’an followed by the major cities of Shanghai and Shenzhen, as the Chinese government stuck to its ‘zero-Covid-19’ policy.
“Lockdowns since March have disrupted industrial production and pushed out hopes of China’s reopening further, which has added to investor caution. Ongoing anxiety over regulation crackdowns added to negative market sentiment, as did fears that the US may delist Chinese companies listed in New York if they fail to provide audit documents.”
The Shanghai Composite and Shenzhen Component markets both hit 21-month lows in mid-March as a result, before “clawing back some ground following supportive policy rhetoric from the government,” they said, lending some hope for investors in the country.