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Fund manager who called China stock rally sees end to good times

[SINGAPORE] Back in late October, money managers at Deutsche Bank Wealth Management, which oversees US$390 billion, said the rout was about to end for Chinese equities.

The MSCI China Index has gained about 15 per cent since the end of that month.

Now, Tuan Huynh, chief investment officer for Asia-Pacific at Deutsche Bank Wealth, says the firm is changing its view on the country's stocks, at least in the short term. The profit-taking in Chinese equities over the past few weeks is the smart thing to do, he said.

It's not because Deutsche Bank Wealth expects the US-China trade negotiations to end without agreement.

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On the contrary, Mr Tuan said, the two sides will probably reach a deal. It just won't be this week, and before an agreement is reached, US President Donald Trump's administration will probably increase tariffs on US$200 billion of Chinese goods to 25 per cent from 10 per cent.

Rather, Deutsche Bank Wealth's logic is that any upside from the trade agreement is already priced in. On top of that, stocks generally tend to see weakness in the month of May.

"Our tactical advice is to take profits and recalibrate", maybe in fixed income over the short term, Mr Tuan said in an interview from Singapore on Wednesday. They are "not totally bearish, but ‘cautious' would be maybe the right word".

The situation with the trade negotiations remains fluid. Trump said at a rally on Wednesday that China's leaders "broke the deal". Shortly after, he said that "it will all work out". Earlier, the US and China sent conflicting signals, with Trump expressing optimism and Beijing warning that it will retaliate if the US follows through on a threat to hike tariffs.

Mr Tuan said that Deutsche Bank Wealth only expects an equity pullback in the mid to high single digits, and if that happens, the money manager will recommend getting back into stocks.

"For the next 12 months we are still seeing value," he said. "Although you might not see double-digit returns from here on."