Warnings against portfolio overexposure to China

Investors have been cautioned to remain alert regarding shifts in China’s ‘Zero COVID’ policy, after lockdowns rocked the major business hub of Shanghai and several smaller cities, according to Emanuel Datt.

The Founder and Chief Investment Officer of Datt Capital said any further extensions of lockdowns in China will impact heavily on the global economy.

“In particular, ongoing extensions will stoke further inflation with a large portion of the industrial supply chain originating from China,” Datt said.

“Whilst we have observed a definite shift towards re-onshoring and localisation, this process of ‘de-globalising’ a supply chain takes years. We have observed a shift towards alternative suppliers such as India and south-east Asian nations as firms look for more diversity in their supply chain.”

Datt also said this shift towards localising supply chains will continue due to the rise in shipping costs and uncertainty around shipping times.

He warned investors against weighing their portfolios too heavily towards China and recommended they consider diversifying their investments to mitigate against the effects of extended lockdowns.

“We hear a lot in the media about Tesla’s Shanghai factory shutdown and production problems but this is the tip of an iceberg with Covid lockdowns impacting myriad businesses through supply chains that originate in China,” he said.