The next driver for these markets Sitting pretty close to record highs Given that we feels like for a long time We've been talking about the reflation Trade the vaccine roll out driven trade So i think one of the things we've been Looking at are the global asset Allocation strategies of some of the World's major funds so sovereign funds Like nordis Big pension funds in the uk for example Universal superannuation scheme Calpers in the us and one of the things That we've discovered is that Many of these big funds have very tiny Exposure to China in particular and i think that's a Bit of a disconnect when you look at China's place in the world economy Imf data is telling us that by 2028 The chinese economy will be the same Size in u.s dollar terms As the u.s economy and we think that Global investors need to Reconsider how they allocate money to Asia and in particular china so that's The big theme that we're looking at Right now So for china what are you liking in Particular obviously the tech sector There's a lot of uncertainties Uh but still huge opportunities you Would imagine there as well you're Saying stay away from financials what
Are the kind of I guess lower risk but still high growth Potential Uh sectors that you would be looking at Okay so so one of our guys in Singapore chetan seth who's our head of Strategy for the region he's been Looking At 21 stocks that he's identified out of The asia region in general excluding Japan and in particular he's seen that Comes like 10 cent Alibaba which are your major tech plays Are actually inexpensive on something Called a peg ratio so we take the p E divided by the potential growth and Companies like that We think have got decent returns on in Terms of a growth adjusted value place So We're very comfortable with these names But even in the bank sector i was Talking to our financials analyst Shane botan this morning and what he Said to me is that if you look at Chinese banks like abc China commercial bank these companies Have got you know rock solid dividends And in the context of global bank Valuations Chinese banks again are inexpensive so i Think what we've seen is that a lot of Global investors Are guided by the msci or the footsie
Benchmarks and therefore Don't have to pay too much attention to China but if you are a genuinely Rational investor And you look at china's place in the World then i think these stocks would Get more scrutiny and that's when Valuations would actually adjust towards The developed market levels To your point china's place in the world This gtv chart on the bloomberg showing China's gdp As a percentage of the u.s gdp and They're it's topping 80 percent And estimates are that in a few years it Will actually Equal the size of the u.s economy when You look at Investors getting into the chinese Market whether it's institutional Investors or say pension funds How much exposure do they have to china Well if you look at nordis which is one Of the top three sovereign funds around The world so nor just in norway you got Nps and korea gpif in japan norway Specifically has Three percent of its equities portfolio In china so it's a very very tiny Percentage and i think a lot of these Asset allocation decisions Are guided by the index providers so Msci for example And msci has a category for all of asia
X japan And a mix of that something called Emerging markets and i would argue that Given the scale of china and if we take The next let's say six years which will See China and the u.s reach parity in terms Of overall gdp Then it's probably time for these index Providers to create a new index for China In the same ways we have one for japan Let's talk a little bit about japan Because you've actually Updated your target from three thirty Thousand to thirty two thousand last Week we're very close to that thirty Thousand level For the nikkei two to five at the same Time though uh when it comes to Vaccination news japan is really lagging Not to mention that we do have some A few technical indicators perhaps Showing that that cyclical rally that we Saw in japan may be a little bit Stretched Your thoughts so i think a couple of Factors we have to be mindful of when You look at japan If you take japan's earnings they're Quite international so 50 Of earnings for japanese companies come From outside of japan Be mindful that for japan china is its
Biggest global partner A sorry global trading partner and also U.s Economy has a big influence on japanese Companies many japanese companies have Assets in the us for example so the fact That we've got this big Support fiscal policy support in the u.s Will lead to earnings upgrades for japan And we had the tank and survey published By the boj last monday And we saw the overall confidence levels Of japanese companies Is at the highest level since 2013. so i Think what we're seeing with japan is We've got momentum because earnings have Been very strong We've also got a government and big Business Which is more supportive of foreign Ownership of japanese companies we saw That with toshiba last week So i think there is overall a better Appetite and a more Let's say open appetite towards foreign Investors participating
