(Bloomberg) -- A fund managing pensions for some of Australia’s smartest people is buying Chinese equities in size for the first time after shares in the world’s second-biggest economy slumped into a bear market.
“We have used the latest sell-off to build a position in China A shares,” said John Pearce, chief investment officer of UniSuper Management Pty, which controls A$67 billion ($49 billion) of assets primarily for Australia’s higher education and research sector. “This is really the first time we have had a position of any significance.”
Pearce has hired BlackRock Inc (NYSE:BLK). to manage some of its China equity book, while the remainder will be done by the UniSuper team of fund managers, he said in an interview in Sydney. He declined to say how much would be allocated to the Chinese market.
Skittish investors have dumped Chinese stocks in recent weeks amid concerns on growth after a string of weaker economic data and escalating trade tensions with the Trump administration. The People’s Bank of China sought to shore up confidence in financial markets this week after the recent weakness in the yuan, pledging to keep the currency stable.
“People are just getting a bit too carried away by it all,” Pearce said. “If you look at the history of any major stock-market – and China is a massive market – if you had blindly just bought the market after a 20 percent selloff, more often than not you’ve made money in 12 months time.”
The yuan fell more than 3 percent against the greenback in June, the worst monthly decline since 1994 when the Chinese government unified the official and market exchange rates. The Shanghai Composite Index, where the nation’s so-called A shares trade, has fallen more than 20 percent from its January high.
The Australian pension is not the only investor taking advantage of the slump in Chinese shares. Hedge fund Shanghai Chongyang Investment Management Co. is is adding shares of thermal power and electrical equipment firms, consumer and financial companies as well as dividend plays, according to its president Wang Qing.
UniSuper, whose fund members include current and former Australian university staff, has also tasked BlackRock to invest in emerging-market investment-grade corporate bonds. “If you look at credit spreads and how much they’ve widened, to us the corporates are in pretty good shape,” Pearce said.
The fund’s balanced investment option returned 10.4 percent for the year to June, according to Pearce.