Denmark’s Danica Pension believes in China stock growth

The Danish pension fund still expects high stock returns over time in China, particularly from private companies, its head of equities says.
Denmark’s Danica Pension believes in China stock growth

China’s economy is set to make its stock market attractive again in 2023, according to Danica Pension. The firm is looking among the fully privately held companies in Greater China, as in other markets.

Over the last 20 years, China has been a major focus area within the pension fund’s emerging markets strategy for equities. Danica Pension believe that there are valuation opportunities after two rough years in Asia’s emerging markets, and that especially goes for China.

“There is still room to grow, and we see China as entrepreneurial culture to rapidly build businesses. Take the huge tech companies that grow relatively swiftly, for instance, and the generally high technological adoption rates are remarkable,” Esben Larsen, head of equities at Danica Pension, told AsianInvestor.

He also pointed out that sometimes things might move a bit too fast, like the case of the cancelled Ant IPO in October 2020. However, Larsen sees such cases as part of the terms when investing in emerging markets.

Therefore, Danica Pension also expects a higher return with the risk the pension fund faces as an overseas investor in China.

“If we couldn’t get that expected higher return in emerging markets such as China, we would most likely buy what we were familiar and comfortable with, although we also enjoy the cycle diversification we get with emerging markets diversification,” Larsen said.

The Danish pension subsidiary of the Danske Bank group had assets under management worth 415 billion Danish kroner ($60.7 billion) as of June 30 2022, of which about 120 billion Danish kroner were invested in equities.


He explained that Asia’s emerging markets take up the lion’s share of focus within Danica’s emerging markets pool. The Danish pension fund separates its equity portfolio into three pools, the other two being stocks in the domestic market and global stocks in developed countries.

The latter includes Japan and Singapore among Asian markets. Otherwise, Asia dominates Danica’s emerging markets exposure with around 85%, and China alone makes up close to 40% of the emerging markets exposure, Larsen said. 

Larsen said he finds current stock valuations in Asia’s emerging markets attractive, and China is a good example of that.

Also read: Danica Pension upbeat on Asian equities

“The current pricing contains a lot of negative expectations, and we are a bit more optimistic about the outlook of China’s stock markets,” Larsen said.

He elaborated that China’s new Covid approach and reopening could provide a change in consumption patterns to reignite growth. Furthermore, with the 20th CCP National Congress in October 2022 done, there ought to be political stability going forward to get growth plans and the expansion of the middle class back on track, Larsen noted.


Larsen emphasised that Danica Pension is very selective when it invests through active equity mandates. One key fundamental is a focus on shareholder value, held on a global scale throughout developed and emerging markets.

“We try to avoid companies that are affiliated with governments, government owned entities, state owned enterprises, as they have other stakeholder interests to consider. We prefer 100 % privately owned companies, as we see in the Western markets whereas emerging markets have more cases of state or government involvement,” Larsen said.

With regard to Danica’s ESG efforts, governance has been a challenging but important factor to have full alignment on. The pension fund has a clear governance preference with an emphasis on shareholder value.

“We emphasize on governance when we invest, and we don’t consider it good governance with public influence. Many companies look interesting, but if the ownership structure is unclear and shareholder value is not the driver, then it can be difficult to obtain the 100 % alignment that we seek,” Larsen said.

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