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The US-Chinese conflict could "last our career" – economists



Rai Dalio calls this a "long ideological war". Mark Mobius sees little hope for a quick solution. And Steven Jen says we are witnesses of the start of the fight in 15 rounds.

While the US and China are confronting everything from trade to technology, some of the biggest names in the investment are preparing for an extended supersilonger conflict and adjusting their portfolios accordingly. Mobius, for example, avoids the shares of Chinese exporters and buys companies selling to domestic consumers.

"This competition will be a exhausted process that will probably last our careers," said Jen, a former economist at the International Monetary Fund and Morgan Stanley, who now runs Eurizon SLJ Capital, a hedge fund and an advisory firm. "We, as investors and analysts, have to walk on our own and try not to follow only the latest news. We need to understand economics and cultural differences. "

Betting tensions that helped boost the record to record highs just four weeks ago are taking place fast.

Global-level actions lost $ 4 trillion this month, while US yields in the vault fell to the lowest level since 2017, as the Donald Trump administration rammed customs on Chinese goods and damaged Huawei Technologies Co.. Xi Jinping reacted by inviting his compatriots to join the "new long march," and Beijing prepared to arm its domination of rare countries – key ingredients in smartphones and electric cars.

For Dali, a billionaire founder of Bridgevater Associates, the conflict goes far beyond the commercial war. As China emerges as a world power capable of challenging the United States, countries will confront "all sorts of ways" due to different approaches to government, business and geopolitics, he wrote in a series of posts on LinkedIn this month that did not mention his investments.

"They can not negotiate on these more fundamental issues," Dalio writes, whose company oversees about $ 160 billion and has offices in Westport, Connecticut and Shanghai.

Even if Trump and Xi succeed in reaching a trade agreement (expected to meet at the G20 summit in June), China and the United States will continue to confront issues such as technology in the foreseeable future, Mobius says.

"We are in a new game – Trump has really opened this can of worms," ​​said a veteran of the developing market, who left Templeton Asset Management last year to work with Mobius Capital Partners, in an interview with Bloomberg Television. He marked India, Vietnam and Bangladesh as potential beneficiaries because the conflict has caused manufacturers to diversify away from China.

Kyle Shin of Gen2 Partners, who manages $ 1.3 billion in hedge funds, has returned from a recent Chinese trip convinced that the conflict will take decades to get rid of. As Chinese bonds in his portfolio mature, Shin replaces them with high-quality corporate debt in developed markets, he said in a telephone interview. The Hong Kong-based management fund manager this year released a mid-to-one refund after achieving 20% ​​in 2018.

John Foo of Kingsmead Asset Management went even further, selling all of its shares in Chinese shares for the first time in its decades-long career in Asia. The shares landed in mid-2018 due to a trade war and tightening of credit conditions.

Since then, Foo has transformed the Kingsmead Asian-funded fund into a multi-strategy hedge fund focused on economies along the Mekong River, such as Thailand and Vietnam. The countries of Southeast Asia, which have a long history of working with the US and China, benefit from a change in supply chains, Foo said.

Not all have predicted a dramatic change in the status of the house. James Gorman, Morgan Stanley's chief executive, told Bloomberg television he did not expect a full-scale war, although he warned that it would take decades to resolve all of his issues. Jiran Eurizon SLJ sees 80% of the looks that the conflict will ultimately end up peacefully.

Some merchants see recent losses in risky assets as purchasing options. Iunki Capital, a hedzong fund that manages $ 130 million, has increased its position at Rogers in December, and again this month, after the share of US special-component manufacturers dropped.

The company, which laminates of printed circuit boards use in base stations of mobile phones and other special components, is an indirect supplier for Huavei and ZTE Corp., another Chinese telecommunications powerhouse that has faced the attention of the Trump administration. Chris Vang, founder of Iunkia, bet that global demand for Rogers products will remain strong despite the conflict between the US and China.

In the meantime, hopes for trade advances have not completely disappeared. Andi Rothman, a former US diplomat in Beijing, now an investment strategist in Matthews Asia, is optimistic that Trump will reach an agreement before the 2020 presidential election. "I continue to believe that Trump believes that China's trade agreement is better than there is no agreement on his chances of re-election," he said.

This helped back global stock prices in the first four months of this year, but market action in the last few weeks has been indicative of skepticism. Sam Trump himself said on Monday that he was not ready to reach an agreement and that customs on Chinese goods "could rise very, very significant".

It is never certain whether a real estate investor – who has become a politician – will monitor his threats, but Gen Gen2 does not take any chances.

"Maybe it's a good time to sell in May and go," he said. "We do not want to risk 2019."

US-CHINA trade war

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