Monday Club – 28/04/25: Your weekly Wealthwise digest

Investment round-up

Jupiter sees outflows

Jupiter Fund Management saw heavy outflows in the first quarter of this year, with assets under management falling by £1bn. As of the end of March 2025, the group’s assets sat at £44.3bn.

FCA to rule on regulatory capital

The FCA is proposing to streamline the rules on the types of funds investment firms must hold to absorb losses and maintain financial resilience during periods of stress. The proposals do not change the level of capital firms must hold but focus on simplifying and consolidating the definition of regulatory capital.

AJ Bell hits new assets high

AJ Bell’s assets under administration hit a record high of £90.3bn in the first quarter of 2025, rising 1% over the three-month period and 13% year-on-year. The firm’s platform business gained 90,000 new customers, bringing its total client base up to 593,000.

In focus: Made for China?

Markets breathed a sigh of relief last week when US treasury secretary Scott Bessent said the ongoing tariff war with China was unsustainable and he expected a de-escalation. Later on, Chinese premier Xi Jinping unveiled a plan to counter his country’s continuing economic problems and the impact of the US trade war, including an increase in unemployment insurance pay-outs and a pledge both to raise wages and boost consumption. The respective announcements suggest China’s economy may yet weather the current turmoil.

Until the latest escalation in the tariff war, the Chinese economy had been staging an encouraging recovery. After a strong end to 2024, with economic growth well above the country’s 5% target, the first quarter of 2025 was also unexpectedly strong. Growth remained at 5.4% – against expectations of 5.1%.

The strength was widely spread too – for example, retail sales received a significant boost from the government’s trade-in programme, while household expenditure also accelerated in an encouraging sign that consumers may be willing to part with their accumulated savings. The manufacturing purchasing managers index (PMI) rose to a 12-month high last month, outpacing expectations.

At the same time, the property market – for some time now a significant and enduring drag on economic growth – is also showing signs of stabilising. The various government stimulus packages have been designed to counteract persistently weak demand in the property sector – and new home prices stabilised in March after a slight month-on-month dip in February. According to Dale Nicholls, manager of the China Special Situations fund, ‘Tier One’ Chinese cities have seen month-on-month pricing increases for around six months.

Then, however, came the tariff troubles. “What was, until 1 April, a pretty nice recovery has been derailed,” Nicholls continues. “There has been a huge increase in the uncertainty in markets. It has all happened very quickly and I think people are surprised.

“If you are at tariffs of 145%, there is no trade, so anything beyond that will not make any difference anyway. Net exports have been an increasing contributor to growth while investment and consumption have had less impact. The concern is that, if net export contribution declines, can other factors offset it?”

China still has some levers it can pull, however. “In the absence of a negotiated agreement, it is likely that China will seek to boost consumer spending to offset macroeconomic headwinds, as the authorities seek to support consumer confidence,” says Dave Perrett, co-head of Asia Pacific Equities at M&G. “There is also the risk of further escalation as both sides jockey for leverage in negotiations.”

Although Xi Jinping has announced tentative stimulus plans, Nicholls believes the final plans will not be decided until the final tariff regime is clear. “Only then can the Chinese government judge the final impact – and deliver a stimulus to match,” he says. “The higher the impact from tariffs, the greater stimulus there will be from the government.”

The potential impact is difficult to quantify. Chinese policymakers have learnt from ‘Trump 1.0’ and steered their economy away from a dependence on exports to the US. Nicholls points out the MSCI China index’s revenue exposure to the US is just 3%, adding: “There is a broader impact on the economy, obviously, but generally it feels like a significant over-reaction.”

For his part, Iain Cunningham, head of multi-asset growth at Ninety One, argues the tariff war is likely to accelerate a shift already evident in China. “Over the past six months, several policy shifts suggest a pivot towards domestic demand is already underway,” he explains.

“It began last September with a reaffirmation of the ‘policy put’ under Chinese equities. This was followed by a striking shift in housing rhetoric – from ‘houses are for living, not for speculating’ to ‘stop the decline’. Stabilising the property market is crucial to arrest the feedback loop of falling confidence, a debt deflation spiral and the resulting negative wealth effect.

“At the same time, president Xi has taken visible steps to rebuild trust with the private sector, meeting firstly with top Chinese executives and then with global business leaders. These moves signal an acknowledgment that private-sector confidence is essential for any recovery in domestic demand. Fiscal expansion has also been slated to rise by around 2% of GDP compared with last year, providing a further boost.”

China’s ‘special action plan’ – released in March – went even further in supporting consumption. It included boosting income for urban and rural workers, improving training and unemployment insurance, stabilising the property and equity markets and addressing the high household savings rate – which reflects weak social protections.

The government is trying to deliver health insurance, pension provision and public services to free up household spending. The government also expanded the trade-in subsidies for appliances, autos and electric bikes, and improved credit access.

For the time being, not much of this has been reflected in markets, which have been in ‘risk-off’ mode, says Fidelity’s Nicholls. “It’s interesting to look at the divergence between sectors,” he observes. “In particular, the consumer discretionary sector has been the biggest underperformer in China. A large swathe of that part of the market is not impacted by tariffs at all. It feels like a more ‘risk-off’ market with areas such as staples and utilities outperforming.” Investors are not isolating those areas most affected by tariffs.

M&G’s Perrett meanwhile says many Chinese equities remain attractively valued from a bottom-up point of view while interest rates and inflation remain low. “Low interest rates are typically very positive for financial asset pricing – as long as investors have confidence the recovery is becoming self-sustaining and the economy is escaping the grip of deflation,” he adds. Perrett also believes the trade problems are opening up significant opportunities in markets that were already cheap.

Investors should not forget either that there is some astonishing innovation happening in China. DeepSeek showed the country’s technological prowess, while the country leads the world in areas such as electric cars and robotics. Its level of patents is higher than any other country. Of course, there are still flaws in the Chinese economy. The woes of the property market are still far from over. There are deflationary pressures and the trade war could still escalate. Unlike the US, perhaps, it does looks like it has a plan.

There are those quietly suggesting that, in the end, the trade war may be good news for China. It could, for example, increase its self-reliance and make previously-reluctant countries more comfortable to trade with it. And, as the US abandons the soft power it earned through programmes such as USAID, it creates a void into which China may be more than happy to step.

Read more on this from the Guardian here, from Ninety One here and from Reuters here