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(Bloomberg) -- BlackRock Inc.’s Jean Boivin says the fundamental outlook for equities remains “constructive,” so much so that it may be time to buy stocks in China, where worry over the financial strains of property giant China Evergrande Group has investors dumping shares.
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“We are starting to think now it is time to dip our toe in the Chinese equities,” Boivin, head of the BlackRock Investment Institute, said in an interview on Bloomberg TV’s Surveillance on Monday. “You’ve seen a 25% underperformance of the Chinese equities over U.S. equities, for good reasons. At the same time, that means the risk premium has increased considerably.”
While BlackRock maintains a neutral recommendation on the Chinese market given the slowdown in the economy, the likelihood of an easing of Covid-19 restrictions in the next few months means a “broad market exposure” to Chinese equities should be considered, he said.
That assessment fits with the company’s current pro-risk stance. While Treasury yields will climb, Boivin said he expects the Federal Reserve to take a very gradual approach to raising interest rates, noting “we have to go back to maybe the 1950s or 1960s to see the same kind of shallow path.”
But for equities and risk assets, “in that environment we still think that the fundamentals are constructive for the time being,” Boivin said.
He did warn of “headline risk” around the current debate in Washington on raising the debt limit. “There is going to be noise,” said Boivin. “The market is prone to be reacting to noise.”
(Removes inaccurate time reference from first sentence in second paragraph)
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