World Economy

China exposure critical for investors seeking AI portfolio gains

Portfolio managers are urging investors to increase China exposure to capitalize on artificial intelligence opportunities. Standard emerging market strategies miss significant upside, according to Matthews Asia's Andrew Mattock. Broad emerging market funds fail to capture adequate Chinese exposure, with South Korean and Taiwan holdings dominating vehicles like the iShares MSCI Emerging Markets ETF. The Matthews China Fund allocates at least 80% of assets to Chinese equities and has declined 4% year-to-date through Friday. Its largest holdings include Tencent and Alibaba. Hedge fund manager David Tepper signaled renewed interest in Chinese investments in September 2024. Volatility concerns persist, however. KraneShares' chief investment officer recommended protective strategies using options on China-focused ETFs to manage market swings, noting hedge funds utilize this approach for downside protection.