BlackRock trimmed its exposure to Chinese stocks and government bonds, and Asian fixed income more widely, to neutral from a slight overweight, citing a worsening macroeconomic outlook as well as geopolitics.
“China’s ties to Russia also have created a new geopolitical concern that requires more compensation for holding Chinese assets, we think,” Jean Boivin, head of the BlackRock Investment Institute said in a weekly note to clients.
BlackRock also said it upgraded European government bonds to neutral with a view that market pricing of euro area interest rate hikes is too hawkish given the energy shock’s hit to growth.
Boivin’s team also said it saw value in investment grade credit, where annual coupon income was nearing 4% – the highest in a decade.
The asset manager saw “little chance of a perfect economic scenario of low inflation and growth humming along. Last week’s market rout shows investors are adjusting to this reality.”