Three major pension funds in the Nordic region indicated to IPE that they did not see recent behaviour by Chinese regulators – which led to heavy selling of some stocks this summer – as a big concern.
Regulatory action taken by Chinese authorities in recent weeks, which has affected firms in the food delivery and education sectors and elsewhere, has spooked some foreign investors and market participants concerned that it could herald a change in the Asian giant’s policies.
The Hang Seng Index fell about 14% in July, but has now recouped around a third of those losses.
The share prices of Chinese internet behemoths Alibaba and Tencent were particularly hard hit in the sell off.
In the Netherlands, the country’s largest pension fund ABP is thought to have suffered losses on its dedicated China portfolio, which was worth over €20bn at the end of March, with investments heavily concentrated in Alibaba and Tencent.
IPE asked large pension funds in the Nordic region how their investment had been affected by the market rout and whether their views had changed on China.
In Denmark, the DKK82bn (€11bn) labour-market pension fund PBU has seen the market falls dent its Asian exposure but said the risks of China are well known.
Asked whether Chinese stocks were now less attractive because of increased political risk, Carsten Warren Petersen, PBU’s CIO, said: “We believe that the risks are well understood by most market participants by now. We view the prices as fair.”
He said PBU saw significant uncertainty around the country’s future regulation for industries such as entertainment and education.
“Our exposure to the Asian market has been reduced due to the market developments and we have decided not to rebalance the portfolio at this point,” he said.
As for future changes to the portfolio, Petersen said: “We expect to increase our exposure again but we see better value elsewhere at the moment.”
At Varma, one of Finland’s big two mutual pension insurance companies, head of listed securities Timo Sallinen said though Varma had no listed investments in China, it had made Chinese investments through indices.
“The recent development in China is primarily a problem for certain companies there,” he said.
“There’s always been political risk in Chinese stocks. The big picture has not changed,” Sallinen said.
To put the recent action by regulators into perspective, he said domestic demand and supply were very important for China, and authorities consistently wanted to support this.
“I think that they have clearly communicated that,” he said.
Varma had chosen its own approach to China, Sallinen said, and he said there was no need to change it.
Meanwhile, KLP Kapitalforvaltning – the asset management arm of the NOK814bn (€78.4bn) Norwegian municipal pension provider KLP – commented regarding its index management, saying it did not manage its funds according to how it saw political risk for companies.