Singapore's Income Insurance CIO says China 'still investable'

Income Insurance CIO David Chua says it’s too soon to write off China and notes the importance of China and the rest of Asia’s emerging markets for its portfolio allocation.
Singapore's Income Insurance CIO says China 'still investable'

Singapore’s Income Insurance will not hastily write off Chinese investments or conclude the country is no longer investible, as it awaits policy actions to come into play, according to Chief Investment Officer David Chua.

“I'm still sitting on the fence with regards to China as an important asset allocation,” Chua told a panel discussion at AsianInvestor’s 13th Southeast Asia Institutional Investment Forum in Singapore last week.

Income Insurance, previously NTUC Income, has a natural slant towards Asian markets. Taking the trajectory of emerging market growth as a reference, Chua noted that China’s deleverage efforts in the property sector and across the economy are healthy, from a long-term perspective.

David Chua, 
Income Insurance

“So, I wouldn't be too quick — within these 10 months — to write off China and say, China is no longer investable,” Chua said, adding that the rest of the emerging markets are “very much intertwined” with the developments in China.

“I think the question if you ask me will be, how do you want to play in China? How do you want to play Asia emerging markets?” he said.

Noting that the export-driven type of growth is gone, Chua said investors might need to invest in these markets in a slightly different way, such as looking at consumption trends among others.

Agreeing with Chua, Alex Lennard, senior portfolio manager at Ruffer LLP, also told the panel discussion that Chinese equities are a decent place to be allocating capital to in a world with very little hope.

“I wouldn't write off the Chinese reopening as a disappointment yet. I don't think you've seen the full evidence of whether or not that's going to be a success or not. But what's clear is that in a world where most other policymakers are withdrawing liquidity from financial markets, the Chinese are unequivocally adding liquidity to the market at the current time,” Lennard said.

Alex Lennard,
Ruffer LLP 

“The more [urgently] the policymakers act in China, the more likely it is that you get a pretty sharp response, at least in the equity market. And I think a lot of the benefits for the region as a whole will rely on whether China is performing well or not,” he said.

Lennard thought investors who expected a big bang economic reacceleration in China upon reopening were “overly optimistic”, which resulted in them giving up on China.

“We used a lot of the thought processes that went on in the US or Europe to define the success of the Chinese reopening,” Lennard said.

“We have to acknowledge that China was essentially closed for two and a half years. So, expecting behaviourally the economy to reopen, given its scale and breadth, with the same speed as European or American economies, which were closed for far shorter periods of time, was perhaps overly optimistic.”


Income Insurance has a natural home bias in asset allocation, and is partially using Singapore equity allocation for income generation due to its relatively higher dividends.

“The income component has become even more important for us because of the base rates at five, what are you doing from a cash flow generation perspective?” Chua said.

He said private credit investments also offer opportunities from coupon and cash flow perspectives.

Meanwhile, the insurer is actively seeking long-duration assets, ranging from fixed income to infrastructure investments, to help manage the duration mismatch between assets and liabilities.

Looking into 2024, Income Insurance’s Chua sees the US Presidential Election as the biggest risk event. He noted the insurer is taking a scenario-based approach to portfolio construction amid elevated uncertainty going forward.

In the past, the insurer often relied on long-term capital market assumptions for pricing and strategic asset allocation.

“Given the uncertainty on the horizon, there is a whole scope for potential scenarios of how things could pan out,” Chua said.

As such, the firm is now spending more time stress-testing how its portfolio would sustain performance across different economic scenarios, from most to least likely.

Depending on the prevailing view, they could then determine whether it is practical from a return-risk trade-off perspective to take positions accounting for tail risks like high inflation, a soft landing, or other scenarios.

Acknowledging base return assumptions have risen with higher rates, together with higher volatility, the CIO said the insurer has become "more judicious" in deciding what risks to take on across asset classes and regions based on the risk-adjusted return opportunities under different scenarios.

“We’ll see how things land in 2024,” Chua said.

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