In the high-stakes world of global asset management, George Efstathopoulos, a Singapore-based money manager for Fidelity International, is positioning himself as a staunch believer in China’s economic resilience. After capitalizing on China’s dramatic stock market rally in September, Efstathopoulos is doubling down on mainland mid-cap stocks, expecting fiscal stimulus measures to bolster growth in the world’s second-largest economy.
The move underscores his confidence in Beijing’s policy capabilities, even as some Wall Street analysts tread cautiously following geopolitical uncertainties and mixed domestic economic indicators.
Efstathopoulos, who manages approximately $3 billion across diverse assets, shifted his portfolio last week, rotating into mid-cap stocks listed on the mainland. His focus is now on the CSI 500 Index, which has lagged behind the larger-cap CSI 300 Index this year. The CSI 500, representing a broader segment of medium-sized companies, offers opportunities he believes are more insulated from global geopolitics and primed to benefit from domestic fiscal measures.
“Chinese authorities have the ability and they’ll do what they need to do to make sure that domestic growth is decent,” Efstathopoulos said in an interview. He expressed confidence that the government’s policy arsenal will support these smaller, domestically focused firms, positioning them as beneficiaries of future stimulus.
Efstathopoulos’s optimism contrasts with growing caution from some Wall Street strategists. Following Donald Trump’s re-election and Beijing’s prioritization of debt management over direct consumption stimulation, bearish sentiment has crept back into Chinese markets. Many analysts remain wary of potential headwinds, including escalating Sino-American tensions and underwhelming fiscal policies.
Despite these challenges, Efstathopoulos, a veteran investor in Chinese assets across economic cycles, believes Beijing will respond decisively if tariffs or other economic threats from the U.S. materialize. “It makes sense for Beijing to await more clarity on tariffs before deploying dry powder to stimulate the economy,” he said. He also noted that China has significantly diversified its export markets since Trump’s first presidency, making the economy less vulnerable to U.S.-focused trade disruptions.
The year 2024 has been a turbulent one for Chinese equities. After plunging to a five-year low in February, markets rebounded spectacularly in September, with the CSI 300 Index surging 32% in just six trading sessions. The rollercoaster ride has been a boon for nimble investors like Efstathopoulos.
His tactical approach allowed him to profit handsomely during both January’s sell-off and September’s rally. He increased his China exposure to 4% of his portfolio during the summer but scaled it back to 1% as valuations peaked in September. With his recent rotation into mainland mid-caps, his China holdings have settled at approximately 3.5% of the portfolio.
Efstathopoulos has also utilized sophisticated financial instruments such as contracts for difference (CFDs) to optimize his exposure, replacing earlier bets on Hang Seng China Enterprises Index futures.
Efstathopoulos’s current bets hinge on the belief that fiscal stimulus will drive domestic consumption, which in turn will benefit mid-cap stocks in the CSI 500 Index. Unlike the blue-chip-heavy CSI 300, the CSI 500 features companies with stronger ties to local demand and less exposure to international trade volatility.
“If domestic consumption comes through on fiscal stimulus, the CSI 500 is probably going to be the biggest winner,” he said, emphasizing that these companies stand to gain disproportionately from targeted economic policies.
However, Efstathopoulos’s confidence comes against a backdrop of economic uncertainty. China’s latest economic data paints a mixed picture. While retail sales have shown improvement, deflationary pressures persist, reflecting subdued price levels and consumer sentiment. Furthermore, the geopolitical landscape remains fraught, with the U.S. poised to ratchet up pressure on Beijing. Trump’s appointments of China hawks to key positions signal a potential escalation in trade and political tensions.
Investors are also wary of Beijing’s apparent prioritization of debt management over aggressive stimulus. Policymakers have opted for a cautious approach to address long-term financial stability, which has dampened some market optimism in the short term.
Despite these headwinds, Efstathopoulos remains steadfast in his belief that China’s policymakers will act decisively if external risks escalate. He pointed out that Beijing’s strategic patience aligns with its broader economic goals, allowing the government to allocate resources effectively when needed.
“You want to see what the potential damage might be to be able to bridge gaps,” he explained. This measured approach, he argued, positions China well to weather geopolitical challenges and maintain steady domestic growth.
Under Efstathopoulos’s leadership, Fidelity International’s global multi-asset growth and income fund has delivered strong results, achieving a 9.5% return over the past year. The fund targets an annual return of 7% to 9% over the economic cycle, balancing risk and reward across diverse asset classes.
The manager’s ability to navigate volatile markets and identify tactical opportunities has been a key driver of this performance. His focus on mid-cap stocks reflects a broader strategy of uncovering overlooked opportunities in less crowded segments of the market.
As Chinese stocks consolidate after the October peak, the coming months will test the resilience of Efstathopoulos’s mid-cap bets. Much will depend on Beijing’s policy decisions and the trajectory of Sino-American relations.
For now, the Fidelity manager’s strategy highlights a broader theme in global investing: the importance of understanding local dynamics and aligning portfolios with long-term structural trends. In the case of China, this means betting on the government’s ability to manage its economy and drive domestic growth through targeted measures.
Efstathopoulos’s moves may seem bold in a market rife with uncertainty, but they reflect a deep conviction in the transformative potential of fiscal stimulus and the resilience of China’s mid-sized enterprises. If his thesis proves correct, the CSI 500 could emerge as a standout performer, rewarding investors who dared to look beyond the immediate challenges.
