Why some U.S. fund managers like China regardless of trade deal

FILE PHOTO: Chinese staffers adjust U.S. and Chinese flags before the opening session of trade negotiations between U.S. and Chinese trade representatives at the Diaoyutai State Guesthouse in Beijing, Thursday, Feb. 14, 2019. Mark Schiefelbein/Pool via REUTERS

NEW YORK (Reuters) – U.S. President Donald Trump’s decision to delay raising tariffs on $200 billion worth of Chinese goods has helped push global stock markets broadly higher as investors hope for a resolution in the trade war between the world’s two largest economies.

Yet some U.S.-based fund managers from firms including Wells Fargo Asset Management, Causeway Capital Management and Janus Henderson Investors say they are becoming more bullish on China regardless of whether a trade agreement is reached over the next few months.

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That is because China has responded to the threat of escalating trade tariffs by increasing its monetary and fiscal stimulus, softening the potential blow as its economic growth rate falls to the slowest pace in 28 years.

China’s central bank has cut the reserve requirement ratios for commercial banks, making lending easier, while tax cuts and increased infrastructure spending are expected to bolster the economy. China’s banks made a record $477 billion in new loans in January.

The stimulus Chinese officials have started to drip-feed to the economy will likely result in a confluence of positive sentiment and positive growth surprises

said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management.

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