(Bloomberg) — When Michael Strobaek joined Lombard Odier as chief investment officer in November, one of his first big moves was to sell all the Chinese stocks and bonds in his holdings managed for private clients.
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“I have eliminated all Chinese assets,” said Strobaek, who instead shifted the $249 billion Swiss private bank into U.S. stocks, government bonds and the dollar. It worked “extremely well,” he said in an interview on Friday.
Even after a recent stimulus by Chinese authorities lifted the country’s benchmark index to its biggest gain since 2008 last week, Strobaek has no regrets.
The bank’s China exposure was about 6% of its strategic asset allocation, which determines how client funds are divided among stocks, bonds and other assets. It’s zero now, Strobaek said. Lombard Odier has total assets under management of 209 billion Swiss francs, the majority of which are private clients, while the asset management unit has approximately 63 billion francs.
The comments underscore the divide among investors over whether the stimulus measures China unleashed last week are the start of a broader recovery. Billionaire investor David Tepper said he is buying more of “everything” related to China after Beijing’s moves exceeded expectations. Eurizon SLJ Capital’s Stephen Jen said in a report to clients on Friday that a “serious rally” in Chinese shares is possible.
Strobaek, a Dane who joined Lombard Odier from Credit Suisse last year, is not convinced.
“I don’t think it will have a lasting sustainable impact on the stock market or the economy,” he said of the stimulus measures. “It is a short-term measure to boost sentiment. And honestly, when the government interferes in the capital markets in any material way, I normally don’t see that as a good sign.”
While Strobaek has fielded questions about how clients can use last week’s recovery, his investment staff is advising clients to participate at arm’s length – through Hong Kong stocks or stocks linked to Chinese exports.
After making gains on US stocks this year, he is now considering a pullback given high valuations.
“Our next steps will be to really start lowering US equities and move more outside the US, including emerging markets,” he said. “Excluding China.”
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