PIMCO Overweights Chinese Fixed Income Assets- APAC Head｜SFC Exclusive
01:06
HarryWu,journalistforSouthernFinanceOmnimediaCorp(SFC)
AsChinasteadilypromotesopening-upofthefinancialmarket,newopportunitiesareemergingforglobalinvestors.
Inarecentexclusiveinterviewwith21stCenturyBusinessHerald,AlecKersman,HeadofAsia-PacificatPIMCO,saidthatChinaisavastmarketwithabundanttalentandhasalwaysmaintainedanopenandwelcomingattitudetowardforeigninstitutionsandinvestors.Whetherinmacroeconomicanalysis,portfoliomanagement,orbusinessdevelopment,ChinahasalwaysbeenakeycomponentofPIMCO’sglobalstrategy.
Chinaisanindispensablepartoftheglobaleconomyandfinancialsystem—thisisnolongeranovelviewpoint.Kersmanexplainedthatformanyyears,anyin-depthmacroeconomicanalysismustincludeathoroughunderstandingofChina’seconomictrends.WithoutasolidgraspofChina’scurrentstatusandfuturedirection,itisimpossibletoformacomprehensiveglobalmacroperspective.
KersmansaidthatPIMCOcurrentlyholdsaslightlyoverweightpositioninChinesesovereignbondsandotherfixedincomeassetsandexpectsthisstancetoremainstableinthemediumterm.Giventhesize,importance,andinvestmentopportunitiesintheChinesemarket,PIMCOregardsitasakeyregionwithinitsglobalfixedincomeportfolio.
Meanwhile,globalinvestorsareshowingincreasinginterestincurrencydiversification,nolongerlimitingthemselvestoUSdollarassets.AlthoughtheUSdollarremainstheworld’sprimaryreservecurrency,demandforassetsinRMB,JPY,AUD,andothercurrenciesissteadilyincreasing.TherisingroleoftheRMBasaglobalcurrencyalsoreflectsstructuralchangesintheinternationalfinancialsystem.
Lookingahead,asChinatransitionsfromanexport-driveneconomytoonedrivenbydomesticconsumptionandinnovation,andasitmakesbreakthroughsinhigh-techsectorssuchasartificialintelligenceandnewenergyvehicles,Kersmanbelievesthesedevelopmentswillcontinuetocreatenewinvestmentopportunitiesandfurtherenhanceforeigninvestors’interestintheChinesemarket.
PIMCOisagloballeaderinactivefixedincomeinvestment,withnearlyUSD2trillioninassetsundermanagement.KersmanismanagingdirectorandheadofPIMCOinAsia-Pacific,responsibleforsettingthestrategicdirectionfortheregionandleadingateamofprofessionalstodeliverinvestmentsolutionsandservicetoAsia-Pacificclients.Hehas24yearsofinvestmentandfinancialservicesexperienceandholdsanMBAfromHarvardBusinessSchoolandaJ.D.degreefromtheUniversityofBuenosAires,Argentina.
SFC:WelcomebacktoShanghai.WhatisthemainpurposeofyourvisittoChinathistime?FromPIMCO’sglobalstrategyperspective,wheredoestheChinesemarketstandtoday?
Kersman:Chinaholdsanextremelyimportantpositioninourglobalbusinesslayout,whichiswhyIvisitChinaatleasttwiceayear.Onthistrip,IvisitedbothBeijingandShanghai.Overthepasttwodecades,we’vebeenprovidingassetmanagementservicestoChineseinstitutionalinvestorsandhaveestablishedlong-term,stablepartnershipswiththiscountry.Weareveryencouragedbythecurrentinitiativesbeingpromotedandtheprospectsforfuturedevelopment.
Ialsohadin-depthdiscussionswithourteaminChinatoexplorenewideasandopportunitiesforbusinessgrowthinthecountry.Imustsay,thisisaveryexcitingtime.EachvisitfurtherstrengthensmyconfidenceinthepotentialoftheChinesemarket.It’sincrediblyrewardingtobepartofandwitnessthisprocessfirsthand.
Chinaisanindispensablepartoftheglobaleconomyandfinancialsystem—thisisnolongeranovelviewpoint.Formanyyears,anyin-depthmacroeconomicanalysismustincludeathoroughunderstandingofChina’seconomictrends.WithoutasolidgraspofChina’scurrentstatusandfuturedirection,itisimpossibletoformacomprehensiveglobalmacroperspective.Thishasremainedtrueovertheyears.
AtPIMCO,ourmacroeconomicresearchcoversmultipledimensions,includingsovereigndebtandcreditresearch.WededicatesubstantialresourcestostudyingChina’smarketdynamics.Inourdiscussionsonglobalmarketviews,Chinaisalwaysatthecore—whetherastheworld’ssecond-largesteconomyorasoneofthelargestbondmarketsglobally.Lookingatthenextfivetotenyears,China’simportancewillonlycontinuetogrow.
Whetherinmacroeconomicresearch,portfoliomanagement,orbusinessstrategy,Chinaisacriticalpartofourglobalframework.We’vehadapresenceinAsia-Pacificfornearly30years,withourfirstofficeestablishedin1996.Infact,ourfirstofficeoutsidetheUSwasopenedintheAsia-Pacificregion.
SFC:Inyourview,whatisthebiggestchallengePIMCOfacesinexpandingitsbusinessinChina?
Kersman:Idon’tbelievewefaceanysignificanthurdlesinexpandinginChina,andthat’soneofthereasonsI’mhere.Over20yearsago,webeganservingChineseinstitutionalinvestors.In2018,weestablishedaWhollyForeign-OwnedEnterprise(WFOE)inChinaandlaterreceivedQualifiedDomesticLimitedPartner(QDLP)quotafromtheShanghaiMunicipalFinancialRegulatoryBureau.Sincethen,we’vebuiltasignificantlocalclientbase.Thesehaveallbeengradual,correct,andlong-term-orientedsteps,andIdon’tanticipatemajorconstraintsgoingforward.
Chinaisavastmarketwitharichtalentpoolandhasalwaysbeenopenandwelcomingtoforeigninstitutionsandinvestors.Toreinforceourlong-termcommitmenttotheChinesemarket,werecentlyappointedStephanieHeasourHeadofChina.SheisbasedinourShanghaiofficeandisresponsibleforoverseeingandadvancingourstrategicdevelopmentandbusinessoperationsinChina.
SFC:AsChinacontinuestoopenitsfinancialmarkets,howdoyouviewthefutureroleoftheGreaterBayArea(GBA)?
Kersman:TheGreaterBayArearepresentsasignificantstrategicopportunity,andwe’vebeencloselymonitoringandresearchingthisregionforquitesometime.We’reseeingcontinuedgrowthincapitalflowsthroughtheSouthboundandNorthboundinvestmentchannels.Thisregionindeedholdstremendouspotential,anditsdevelopmentwillbegradualandincremental.
Currently,mostSouthboundcapitalisbeingallocatedtofixeddepositsinHongKongbanks.Althoughsomeofitisflowingintoinvestmentproducts,theoverallproportionremainssmall.Thisisanareawearecloselywatchingandplantoactivelyparticipateinattherighttime.
Weremainoptimisticaboutthegrowinginterestfrombothindividualandinstitutionalinvestorsandlookforwardtoseeinganexpansionintherangeofinvestibleproductsinthemarket.WeviewtheGBAasanemergingandimportantmarketopportunity.Wearemonitoringrelevantpoliciesandmarketdevelopmentscloselyandhopetoseefurtherprogressinthenearfuture.
WehavebeenpayingcloseattentiontotheCross-boundaryWealthManagementConnectSchemeintheGBAandbelievethismechanismwillcontinuetoexpand.We’vealsostudiedtheMutualRecognitionofFundsschemeandareevaluatingwhetheritalignswithPIMCO’sproductstrategy.Weregularlyreviewthesecross-borderinvestmentopportunitiesandwillconsiderincreasingourinvolvementwhenthetimeisright.
SFC:Whatareyourlong-termexpectationsforthedevelopmentofWealthManagementConnect?
Kersman:WealthManagementConnectpresentsanextremelyattractiveopportunity.Giventhelargepopulationoftheregion,includingHongKongandMacao,thegrowthpotentialisenormous.
Overthepastfewyears,theschemehasmadesteadyprogress,withpositivedevelopmentsinboththeSouthboundandNorthboundinvestmentflows.Meanwhile,regulatorshavecontinuedtorefineandoptimizetheframeworktomeetevolvingmarketneeds.
Lookingahead,thistrendisexpectedtocontinue.Bothinvestmentopportunitiesandinvestorinterestwillcontinuetogrow.Atthesametime,ongoingimprovementstotheregulatoryframeworkwillhelpfosterthedevelopmentoffinancialproductsthattrulymeetinvestorneeds.Inthelongrun,theCross-boundaryWealthManagementConnectSchemeispoisedforgreatsuccess.
SFC:Inrecentyears,theQDLPpilotprogrammehasexpandedrapidlyinmultiplecities.WhatprogresshasPIMCOmadeinthisarea?AmidtherapiddevelopmentofChina’sassetmanagementindustry,doesPIMCOhaveanynewstrategiesorproductplansfortheChinamarket?
Kersman:TheQDLPpilotprogrammehasdeliveredverypositiveresults.Whentheregulatorslaunchedthismechanismoveradecadeago,theydemonstratedremarkableforesight.QDLPhasplayedacrucialroleingraduallyopeningupChina’sfinancialmarkets.Webelieveitisahighlyeffectivepolicyinnovation,andweareproudtobepartofit.Wealsobelievethispositivemomentumwillcontinue,withtheprogrammeexpandingsteadilyatapacealignedwiththeregulators’direction.
Todate,wehavelaunchedthreestrategiesundertheQDLPframework,andwemayconsiderintroducingadditionalproductsnextyear.Ourprimaryobjectiveistooffertherightproductsattherighttimetotrulymeettheneedsofinvestors.
SFC:Inthepast,manyChineseinvestorspreferredhigh-returninvestmentsinthepropertymarket.Inthecurrentenvironment,doyouthinkfixedincomeassetswillbecomemoreattractivetoChineseinvestors?Whatareyoursuggestionsforglobalassetallocationinthefuture?
Kersman:Theanswerisadefiniteyes.Formanyyears,Chineseinvestorshavebenefitedsignificantlyfromrealestateandequities.Whileopportunitiesstillexistinthosesectors,moreandmoreinvestorsarebeginningtorealizetheimportanceofbuildingadiversifiedandbalancedportfolio—onethatincludesequities,fixedincome,andmulti-assetstrategies.Suchportfolioscandelivermoreresilientperformanceacrossdifferentmarketenvironments.Overthepastfiveyears,awarenessofthisconcepthasgrownsignificantly,whichalsoexplainswhyPIMCO’sBalancedIncomeandGrowthstrategyunderQDLPhasbeensowellreceivedbybothChineseandglobalinvestors.Lookingahead,aslongasQDLPquotaisavailableandmarketconditionsareright,wewillcontinuetolaunchnewproductsunderthisframework.
Webelievethathigh-qualityglobalfixedincomeassetsofferexceptionalvalueinthecurrentenvironment.ConsideringthepossibilityofaUSeconomicslowdowninthesecondhalfofthisyear,alongwithpotentialratecutsfromtheFed,investorscanbenefitfromattractiveyieldsandpotentialcapitalappreciation.Increasingly,sophisticatedinvestorsareallocatingtohigh-qualitybondsorconstructingbalancedportfoliosthatcombinefixedincomestabilitywithequitygrowthpotential.
SFC:HowdoesPIMCOleveragetheQDLPmechanismtomeetthegrowingglobalassetallocationneedsofChinesehigh-net-worthindividualsandinstitutionalinvestors?
Kersman:It’simportanttounderstandwhattheseinvestorsarereallylookingfor.FormanyChineseinvestors,globalassetallocationisanewstageintheirinvestmentjourney.Historically,theirfocushasbeenonpropertyandequities.Asmarketcyclesevolve,theyarestartingtoseetheimportanceofbalancinghigh-riskandlow-riskassets.Whentheseinvestorsbeginallocatingoffshore,thefirstthingtheylookforisatrustworthypartner—afirmwithstrongprofessionalcapabilitiesandasolidtrackrecord.PIMCO’scoreadvantageliesinthefactthatwebuildlong-termrelationshipsbasedontrust,supportedbyagloballyconsistentandstableinvestmentprocess.
SFC:HowdoyouseetheroleofforeignassetmanagersevolvinginChina?WhatisPIMCO’svisionforthenextfiveyearsinChina?
Kersman:WebelievethattheroleofforeignassetmanagersinChinawillcontinuetogrow.Whetherintermsofinvestmentorbusinessdevelopment,theChinesemarketofferstremendousopportunities.Weareactivelyexploringvariouswaystodeepenourengagement.AtPIMCO,wealwaysapproachourdevelopmentinChinawithcautionandprudence,ensuringthatourinvestmentpaceandscaleareinlinewithourglobalstrategyandtrulyalignedwiththeneedsandopportunitiesofbothlocalandglobalinvestors.
Lookingaheadoverthenextfiveyears,wewillcontinueonthesametrajectorywe’vefollowedoverthepastfiveyears.IwillalsocontinuetovisitChinafrequentlytoexplorenewareasofgrowthandopportunity.
SFC:ForeignandChinesefinancialinstitutionseachhavetheirstrengthsandweaknesses.HowdoyouviewtherelationshipbetweenPIMCOandChineseinstitutions—competitionorcooperation?
Kersman:WearefortunatetohavebeenoperatinginChinaformanyyearsandtohavereceivedstrongsupportfromthelocalfinancialecosystem.WealsohighlyrespectandappreciatetheprofessionalismandprudenceofChineseregulators,whohavedemonstratedforesightandresponsibilityinpromotingmarketdevelopment.
Atthesametime,wehaveestablishedclosepartnershipswithnumerousChinesefinancialinstitutions.Inmyview,PIMCO’spresenceinChinaisnotaboutcompetingwithlocalfirms.Rather,weaimtobringover50yearsofglobalinvestmentmanagementexperienceintotheChinesemarket,contributeourexpertise,andlearnfromoutstandingdomesticpeers.
Weworkwithassetmanagementcompanies,banks,trustfirms,andvariousdistributionchannels.Iseethismoreascollaborativeprogresstoadvancethemarket,ratherthanpurecompetition.Ourgoalistoworktogethertoexpandthemarketspace,createmoreopportunities,andachievemutualsuccess.
SFC:ComparedtolocalChineseinstitutions,whatarethecoredifferentiatorsofPIMCO’sproductsinChina?
Kersman:Itreallydependsonthemarketcycleandtheassetclass.Forexample,investorsinterestedinChinaA-sharesmaypreferwell-knowndomesticequitymanagers.However,whenitcomestooffshoreinvestmentopportunities,PIMCOoffersdifferentiatedsolutionsbackedbydecadesofexperience.Ultimately,investorswillchoosetheproductsthatbestmeettheirneeds.
SFC:Giventhecurrentglobalgeopoliticalandmonetarypolicyuncertainties,howdoesPIMCOviewChina’sbondmarket?Whatareyourviewsonitsmediumtolong-termprospects?
Kersman:WebelievethereareplentyofattractiveinvestmentopportunitiesinChina’sbondmarket.Atpresent,weholdanoverweightpositioninChinesefixedincomeassetsandexpectmonetarypolicytoremainaccommodativeoverthenextfewmonths.Overall,wemaintainacautiouslyoptimisticviewonChina’sbondmarket,withaneutralstanceonriskexposure.
China’sbondmarketisoneofthelargestintheworld.Activeparticipationinthismarketiscrucialforbothourlocalandglobalclients.Itholdsstrategicimportanceforus.
WehavealreadyestablishedastrongpresenceanddeepinvolvementintheChinesebondmarket,dedicatingsignificantresearchresourcesandmaintainingarelativelyhighallocationtotheseassets.Currently,weareslightlyoverweightinChinesesovereignbondsandotherfixedincomeassetsandexpecttomaintainthispositionoverthemediumterm.
Giventhesize,importance,andinvestmentopportunitiesoftheChinesemarket,weseeitasakeyregioninourglobalfixedincomestrategy.Amongglobalbondmarkets,Chinaisoneofthelargestandoffersthegreatestgrowthpotential.WewillcontinuetostrengthenourinvestmentandengagementinChina.
SFC:HowdoyouviewtheglobalattractivenessofRMBassets?HasPIMCOobservedanyshiftsinglobalinvestorsentimenttowardRMB-denominatedbonds?
Kersman:Weareseeinggrowinginterestincurrencydiversificationamongglobalinvestors,withlessfocusonUSdollarassetsalone.Whilethedollarremainsthedominantglobalreservecurrency,demandforRMB,JPY,AUD,andothercurrenciesissteadilyincreasing.TheRMB’sroleasaglobalcurrencyissteadilyexpanding,reflectingbroaderchangesintheinternationalfinancialsystem.
ChinahasmadesignificantprogressintheinternationalizationoftheRMBandoutboundinvestment.Thepaceoffurtheradvancementwilldependonglobalfactors.Thatsaid,theRMB’sglobalstatusisrising,andthetrendtowardcurrencydiversificationiscreatingrealopportunities.
SFC:Inrecentyears,asChinahasrapidlydevelopedinartificialintelligenceandotherhigh-techfields,morecompanieshaveincreasedtheirinvestmentinChina.DoyouthinkthiswillattractmoreoffshorefundstoallocatetoChineseassets?
Kersman:Ibelievethatisverylikely.AsChinatransitionsfromanexport-driveneconomytoonedrivenbydomesticconsumptionandinnovation—makingbreakthroughsinfieldssuchasartificialintelligenceandnewenergyvehicles—newinvestmentopportunitieswillcontinuetoemerge.Thisstructuraltransformationwillfurtherenhanceoffshoreinvestors’interestintheChinesemarket.