China’s slowing economy pushes investor focus eastward

Investors are moving their primary focus away from European woes and looking east as concerns over China’s slowing economy grow, according to the latest quarterly buy-side research from Corbin Perception.

Investor concerns are largely concentrated on the international landscape – particularly Asia – states the Corbin study. As one investor tells researchers, China has been ‘the locomotive for the world economy for the last several years... to the extent that [if] its growth slows ‒ and it is slowing ‒ that could be quite negative for the world economy.’

Despite this, 64 percent of surveyed investors continue to believe China will have a positive influence on the global economy over the next 12 months, adds Corbin.

Continuing the Asian theme, Corbin says 21 percent of its respondents express concern that Japan will move into recession, despite Prime Minister Shinzo Abe’s stimulus policies.

The increased focus on Asia doesn’t mean investors have taken their eyes off Europe, however. Despite a lack of ‘major headline news coming out of Europe during 2Q13,’ Corbin stresses that the ‘persistent ‘babbling in the background’ continues to weigh on sentiment, albeit to a much less extent than previous findings.’

While 72 percent are ‘mindful’ of issues in the eurozone, one investor says: ‘Europe will continue to struggle for a couple of years… so it is not a headline risk at this point.’ Forty-two percent expect the subdued European economy to last three to five years, while a third believe it can recover in one to two years’ time.

The US ‘remains a relatively bright spot when compared with the rest of the world,’ Corbin adds. Seventy-one percent of investors identify ‘the Fed monetary policy as the primary driver of the market’s significant rally’, though 43 percent point to a ‘lack of alternative investment opportunities (such as fixed income) as a contributor’.

Overall, Corbin adds that management tone is ‘less negative’ for the second consecutive quarter, though investors generally agree that ‘managements are trying to keep a lid on expectations’ and thus offering up ‘quite conservative guidance’.