Australia’s fund management industry is set to be a foremost beneficiary of China’s capital account liberalisation and increasing overseas investment, says AMP Capital.
Speaking to InvestorDaily, AMP Capital head of dynamic asset allocation Nader Naeimi said China’s capital account liberalisation process means that there will be a significant amount of capital allocated overseas and specifically to Australia.
China’s premier Li Keqiang recently indicated that China will invest $1 trillion overseas in the next five years, according to Chinese news site China Daily.
Mr Naeimi argued that Australia’s fund management industry will be a recipient of this allocation. He said when looking at China’s foreign currency reserve – around $3.8 trillion – most of it is sitting in low yielding assets.
“There’s a lot of room for a lot of those [funds] to be diversified into global markets and so I think the funds management industry in Australia will be significant beneficiaries of that potential money.
“This flow of capital will be positive for the ASX, [and] the whole funds management industry," he said.
Mr Naeimi said Australia’s infrastructure sector is also likely to get a significant injection of capital.
“Infrastructure assets like roads, ports, mining, and electricity – a whole bunch of areas will probably see a lot of Chinese investment.
“It is positive because, first of all, we do need a lot more to be invested in our infrastructure to increase productivity in this country," he said.
Mr Naeimi said bilateral trade agreements with China will only increase the likelihood of further capital investment in Australia.
However, he warned that the largest risk to this trend lies in Australia’s relationship with the United States.
“We’ve got to realise that China is really important for our growth and for our trade.
“We have our own regional interests here and there are times that we stay away from taking sides,” he said.
Mr Naeimi said from a political point of view, going forward Australia's policymakers will need to balance its economic and defence-based interests carefully.