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Shift away from China – Rajiv Jain’s Middle East gamble

Posted:Jan 15, 2024 15:47 Category: AI , Asia , Forex , Posted by Lea Hogg

Led by Rajiv Jain, fund manager GQG has strategically invested $2.8 billion in Middle Eastern stocks, marking a shift from their previously strong presence in the Chinese market.

This calculated shift comes in response to the perceived business-friendly initiatives of Middle Eastern governments and their commitment to diversifying away from oil dependence.

Increased exposure to Middle East

Over the past 18 months, GQG, a Florida-based asset management firm overseeing $105 billion in assets, has actively increased its exposure to Middle Eastern companies. Jain, known for his contrarian bets, highlighted the region’s potential for economic liberalization through massive privatization initiatives, providing a compelling rationale for this significant move.

GQG’s Middle East investments now surpass its holdings in China, a stark contrast to five years ago when China constituted 40 percent of the firm’s emerging markets portfolio. The decision reflects a re-evaluation of risks associated with China, particularly its outsized influence on emerging markets indices, which posed challenges amid economic slowdown and escalating trade tensions.

Jain articulated concerns over China’s crackdown on industries dominated by private sector companies, citing recent regulatory interventions affecting tech giant Tencent.

Divesting from China

The unpredictability of Chinese policies has instilled nervousness among investors, prompting GQG to recalibrate its portfolio away from Chinese investments, reducing its exposure to just 5 percent in state-owned entities.

While divesting from China, GQG has strategically diversified into promising sectors, with a keen focus on global tech stocks, especially in the chip sector. The firm is optimistic about the increasing demand for greater computing power, particularly for artificial intelligence (AI). Jain emphasized the bullish outlook on chips, anticipating a sustained supply-demand dynamic for the next three years.

Commitment to emerging technology and AI

GQG’s confidence in the chip sector led to increased holdings in Nvidia, despite the stock’s significant appreciation in the fourth quarter. The firm’s strategic moves in the tech sector, including investments in British chip designer ARM and active participation in Nvidia’s growth, underscore its commitment to emerging trends, notably AI.

As GQG makes bold moves in the Middle East and strategically shifts away from China, the market watches closely to assess the outcomes of these calculated decisions. The firm’s conviction in emerging trends, coupled with its adept portfolio management, positions it as a key player navigating the evolving landscape of global investments.

 

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