How to invest in winners of China reopening amid bleak stock market outlook

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A CIO who helps oversee $98 billion details how to invest in the winners of China's reopening in an environment where the wider stock market will struggle to break even for the rest of the year

Jimmy Chang, the CIO of Rockefeller Capital Management, believes the best case scenario for stocks in 2023 is to trade sideways.Potential beneficiaries include emerging markets and energy producers, such as Australia.

For instance, he believes that January's economic activity — which came in stronger than analyst forecasts — might be conflated due to warmer weather this winter, boosting service-oriented industries like restaurants and hospitality. Additionally, since central bank policies always have a lag, Chang doesn't believe that the full impacts of the current rate-hiking cycle have been felt yet — and that they could still affect the economy going into 2024.

As for the severity of a potential recession, while some investors have pointed to the nest eggs American households managed to stash away during the pandemic as proof of a mild slowdown, Chang believes the bigger picture is a little more complicated — and could be potentially more severe than expected. He points out that credit-card debt has increased recently, and says while a slowdown may feel mild at the top of the income spectrum, people on the lower end will feel more of a pinch.

"There's going to be potentially more commodity demand," he explained, pointing to an increase in Chinese tourism that will benefit countries like Thailand and could propel oil prices higher. Additionally, the Chinese central bank's efforts to ramp up its liquidity could also help lift asset prices higher.

 

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