Morgan Asset Management: The average annual expected return rate for Chinese stocks in the next 10-15 years is 7.8% with a recommendation to hold.
12/11/2024
GMT Eight
Morgan Asset Management's Chief Market Strategist for Asia-Pacific, Xu Changtai, stated that the bank expects the average annual return on Chinese stocks over the next 10-15 years to be 7.8% (in USD). Even if Chinese stocks experience a significant rebound in September 2024, the market still provides cyclic opportunities with attractive valuations, so the view on Chinese stocks is to increase holdings. He mentioned that corporate profit margins will increase, but there is uncertainty regarding the sustainability of profit growth and return on investment, and active management is key to achieving excess returns. Even if Trump returns to the White House and imposes tariffs on Chinese goods, causing a significant decrease in exports, the central government can still use fiscal policy to support economic growth.
Morgan Asset Management today released the "2025 Long-Term Capital Market Assumptions". The 29th edition of the report predicts a forecasted annual return rate of 6.4% for a 60/40 USD stock/bond investment portfolio over the next 10-15 years, slightly down from last year but still above the long-term average. The report suggests that investors have other opportunities to improve potential returns, especially through active management and incorporating alternative assets into their portfolios. With strong capital investment, advancements in artificial intelligence and automation, and the promotion of fiscal activism, the outlook for long-term economic growth has improved.
Morgan Asset Management's Global Multi-Asset Strategist Sheng Nan stated that the bank's long-term capital market assumptions provide a roadmap for investors to navigate complex market conditions successfully. This year's report emphasizes that active management and alternative assets are likely to help achieve better returns and diversification in investment. In the Asia-Pacific region, Morgan Asset Management notes that both public and private markets offer unique investment opportunities, particularly in Japanese stocks, which have performed among the best in global stock markets with profit margins and equity returns near historical highs. With continued corporate governance reforms and increasing shareholder returns, Morgan Asset Management expects the strong performance of Japanese stocks to continue, and remains optimistic about their prospects.
The Head of Managed Investment Solutions for Morgan Private Bank in Asia, Liang Yiqin, emphasized the importance of building investment portfolios that align with goals, can withstand market fluctuations, and seize growth opportunities. With significant opportunities in infrastructure and other tangible asset sectors, investors can potentially earn stable income by investing in these industries and hedge against inflation in high-interest rate environments. In an environment of increased fiscal spending and accelerated technology adoption, actively managed investment portfolios and risk management approaches are crucial to effectively navigate complex and rapidly changing market conditions.
Regarding the anticipation in the market that Trump's presidency will benefit the development of cryptocurrencies, causing a recent sharp rise in Bitcoin prices, Xu Changtai pointed out that the fundamental factors driving the recent rise in cryptocurrency prices have not changed, leading to significant price fluctuations. Therefore, he personally believes that even if investors want to invest in these types of assets, they should proceed with caution and allocate a relatively small proportion of their entire investment portfolio.