By Divya Chowdhury and Mehnaz Yasmin
DAVOS, Switzerland, Jan 23 (Reuters) – Lower valuations, government support and loose fiscal policy set against a cyclical backdrop in China is encouraging investors to rotate into technology and diversify away from the U.S., UBS fund managers told Reuters this week in Davos, Switzerland.
“We like China tech in particular because there’s some success there. There also seems to be government support,” Mark Haefele, chief investment officer of UBS Global Wealth Management told the Reuters Global Markets Forum.
Haefele said clients in the U.S., Europe and Asia are seeking hedges against the dollar and growing confidence in China’s tech sector is encouraging them to invest more there.
China is rapidly closing the tech gap with the U.S., while strong market debuts by MiniMax and Zhipu AI underscore rising investor confidence as Beijing cultivates homegrown champions.
While the U.S. still holds an advantage in computing power and infrastructure, researchers say China’s progress is driven by innovation under tight budgets.
Ulrike Hoffmann-Buchardi, Americas CIO and head of global equities at UBS, sees a broader cyclical backdrop as the main driver of markets. Fiscal stimulus will lift all regions, creating opportunities in markets that are trading at more attractive valuations, she said.
“We are optimistic, but also cognizant of downside risks, in particular in those countries and areas where capital has gone; (the) U.S. of course has been a big recipient of those inflows,” Hoffmann-Buchardi added.
Mega-cap tech earnings and a U.S. Federal Reserve meeting next week give investors a chance to switch focus from the geopolitics that have dominated since the start of the year.
“With tech earnings expected to grow over two times the growth rate of the S&P 500, I still think the U.S. is going to be the leader,” Saira Malik, chief investment officer of U.S. asset manager Nuveen, told Reuters GMF this week.
Nuveen has a target of 7,500 points on the S&P 500, an upside of around 8.5% from its Thursday close of 6,913.
“As long as inflation remains somewhat benign and the employment markets are slowing, that opens the door to a couple of rate cuts … in the second-half of this year,” she said.
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(Reporting by Divya Chowdhury in Davos and Mehnaz Yasmin in Bengaluru; Editing by Alexander Smith)
