(Bloomberg) -- Bets on a rebound in consumption in China are overdone, according to a top-performing portfolio manager.

Markets have recalibrated rapidly since China’s reopening and “that opportunity has closed really quickly,” said Rob Hinchliffe, who manages the $555 million PineBridge Global Focus Equity Fund. “Valuations aren’t as attractive,” he said in an interview on Monday.

The money manager is still in wait-and-see mode, seeking to gain more clarity on the confidence levels of Chinese consumers. Only two of the 44 stocks held by the fund are listed in Hong Kong, according to the latest data compiled by Bloomberg, namely Shenzhou International Group Holdings Ltd. and Wuxi Biologics Cayman Inc. 

“Just because you have excess money doesn’t mean you’ll spend,” said Hinchliffe. His team is looking at a range of data, from travel and mobility to employment, to understand to what degree Chinese consumers will be deploying their cash. 

The PineBridge fund has outperformed 96% of its peers over the past three years, returning more than 7% this year, Bloomberg-compiled data show. US equities have by far the largest weighting in the fund, which follows a stock-picking approach rather than betting on macro or country trends.

Traders are pondering their next move in Chinese equities after a torrid February abruptly halted the market’s stunning rally since November, igniting a debate on whether the bulk of the gains are in the past. While China’s reopening and the easing of regulatory crackdowns have sparked optimism, President Xi Jinping’s common prosperity agenda means investors have to navigate a landscape where there’s more state control and less room for private enterprises. 

Consumption, a priority for Xi, has yet to see any major stimulus during the National People’s Congress this week. While there’s been a rebound in consumer spending since the end of Covid restrictions, the recovery so far has been uneven. 

But Beijing is still reliant on consumers to drive the economy. After all, Chinese households have about 8 trillion yuan ($1.1 trillion) to 10 trillion yuan in excess available deposits, due to limited spending during the pandemic, according to UBS Group AG. A more cautious view argues that consumers may keep purse strings tight until the economic recovery translates into visible income gains. 

The fund has its biggest overweights in industrials and tech, and is underweight consumer staples and equal-weight consumer discretionary. 

Facing Off Bonds

Looking at the global environment, the era of aggressive monetary tightening is boosting the allure of bonds, which are posing the strongest competition to stocks in years, according to Hinchliffe. 

Over the past month, traders have gone from betting the US Federal Reserve’s benchmark rate would peak around 5% in July to betting it will peak at about 5.6% in September. That has also pressured yields higher, with the two-year Treasury rate touching 5.07% on Wednesday. 

Even retail investors are piling into Treasuries, snapping up the most six-month T-bills in almost 30 years at a recent auction. 

Deepest Bond Yield Inversion Since Volcker Suggests Hard Landing

“A year ago, people were saying TINA: there is no alternative,” said Hinchliffe. “Now when you look at what earnings growth consensus numbers are like, and you look at the volatility, you look at all the ways to be wrong in this market, 5% guaranteed is a real alternative.”

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