China's equity bull market long way to run: UBS executives

NEW YORK - The Chinese equity market boasts great growth potential in the long run and has become more attractive to foreign investors thanks to the optimization of market mechanism and benefits of investment diversification, said executives from UBS Asset Management.

"There is a long way to run in the Chinese equity bull market," said Barry Gill, managing director and head of investment with the global investment bank, on Monday at a media roundtable meeting.

Gill added that China is now opening up and improving the fabric of its equity market.

Kevin Russell, managing director and chief investment officer with UBS O'Connor LLC, a hedge fund arm of UBS Group, said one of his company's investment themes focuses on the Chinese market, not only because of its performance direction, but also its efficiency.

"You short indexes or futures, and you just have a lot more flexibility to put on relative value trades within the Chinese market. That's pretty exciting," Russell said.

The Chinese stock market is very diversified, and stocks in healthcare, education, technology and consumer sectors can offer an organic growth rate, which is multiple times higher than the broader growth rate of the Chinese economy, said Gill.

Highly active asset managers have been allocating assets to the above-mentioned stocks in the Chinese market, according to Gill.

Many people completely ignore the fact that what is going on in China is a massive internalization of its demand. A lot of production taking place in China is just not being exported, as the internal demand is so great, Gill said.

Moreover, the internationalization of Chinese fixed income markets is in its infancy and may take multiple decades to mature, he added.

Currently, more growth-sensitive equity markets in the eurozone, Japan, China, and other emerging markets are favored, while expected volatility from the presidential election and potential changes in US economic policy may disadvantage US equities over their international peers in 2020, according to a bi-annual report issued by UBS Asset Management on Monday.