Edmund Shing, global chief investment officer at Paris-based BNP Paribas Wealth Management, discusses the outlook and opportunities for investors in 2023.

As China’s economy reopens after its zero-Covid policy, Edmund Shing at BNP Paribas Wealth Management in Paris recently highlighted the benefits of investing in emerging market assets in 2023.

Asia is as important for the French-based firm as Europe and Shing is reasonably optimistic about the outlook in 2023. “Chinese equities underperformed for two years in a row and there is a good chance we will see a return to form in 2023,” he told this news service in an exclusive interview.

“We increased our weighting in emerging market equities from neutral to positive in December. We like Europe too and raised our exposure to China and European equities at the same time,” he continued. “We like equities ex-US after 10 years of US outperformance, largely due to tech,” he added. “World equities are in a better place now. They have a lot of very good sectors, outside of technology,” he said.  

“Bonds, in particular corporate bonds are back, notably investment grade credit,” he said. “Emerging market bonds, especially government bonds, which investors shied away from in the past, are looking attractive. Emerging market central banks, like Brazil, increased rates earlier than the Western world to bring down inflation so it's good news for bonds,” he added.

Alternatives   
Shing, who has over 25 years of experience in financial services, also believes that it's important to hold a diversified portfolio, beyond equities and bonds. “Clients should be looking more at incorporating alternatives in their portfolio, though it also depends on the risk profile of the client,” he continued.

“We like commodities. We are moving from a period of abundance to a world where there are increasing shortages of raw materials and commodities. Supply won’t rise fast enough to meet demand,” he said. “We are big on alternatives right now, but within a limit. It’s not good to put all your portfolio eggs in one basket. We believe that there should be a maximum allocation of 20 to 25 per cent in private assets in a portfolio, like private equity,” he continued.

“Are investors confident enough? Some are but some are reticent to take more risk now after last year,” he added. “Clearly, funding costs have gone up. Rates of return for certain private equity funds will be lower as there is more debt. But this can be offset in many cases,” he said.

“I would be more cautious on growth private equity, like venture capital, as more risk is there for startups. Infrastructure is looking positive as there is huge demand there. A lot of upgrading is required, especially in renewables ... Companies and governments will be spending the money. It is also a long-term inflation hedge which is attractive,” Shing continued.

“It’s always good to hold some cash too, especially in volatile times, as you never know what’s coming down the road. It’s good to be able to take advantage of an investment opportunity,” he added.

Wrapping up, Shing said he invests in Europe and the UK, but not so much in the US. He favours infrastructure and financials, and likes healthcare as a long-term option. “Investors also increasingly want to invest more sustainably, such as in the energy transition or in green bonds,” he said.