ETF.com: In the last few interviews, you've been neutral on China. But in recent weeks, China's mainland—or A-share—market, has surged. Has this surprised you? Do you now have stronger views about Chinese equities?
Fitzsimmons: It hasn't surprised us to the extent that the weaker the data, the greater the anticipation that you're going to get policy to accommodate the concerns. You've had this narrative of mini-stimulus, that you were going to have cuts in the reserve ratio requirement levels, you were going to have various loosening of monetary policy, which in actual fact have not happened. But the persistence of the expectations of policy has, along with valuations.
If you looked at it before this recent surge, China and Russia were the extremely cheaply valued equity markets. So they did not participate as much in the second-quarter rebound from the first quarter in emerging markets. To some extent, they've benefited from that out-of-cycle condition of low valuations. With China, though the data continues to be not as robust, and particularly on the credit side not as strong as people have expected, you've benefited from a valuation story.
The other thing that has supported Chinese equities is the weakness in the property market, which tended to be where more of the domestic wealth has been invested and concentrated, because of the poor performance of Chinese equities over the past several years, after the last collapse.
So you may have a bit of a pendulum swinging back in terms of—and with some instigation from—the authorities directing attention to the equity side and away from the property market, which they do want to see correct, just not bust.
That may give equities a bit more support. But again, you've already bounced a fair bit on a lack of actual deliverables. I think on a short-term basis, we're still rather neutral on China.
ETF.com: Obviously the big news right now is the upcoming Alibaba IPO. Do you see this IPO as a catalyst for continued momentum in Chinese equities?
Fitzsimmons: I don't think you can say that broadly across Chinese equities. I think sectorally it certainly is going to give some loft to technology and part of what has built a premium into Alibaba. Apart from the fact that it has a bit more global reach than some of the others, the experience with it is more tangible because of [Alibaba's] relationship with the U.S. side.
The one relatively consistent, bright spot in China is consumption, because you do have a positive demographic for those that are currently moving through the workforce, of working age, in terms of income, in terms of disposable personal income and employment prospects. They're positive, and you've seen this in the continuing gains to consumption.
So I think it has to be looked at in terms of specific sectors and companies, rather than necessarily just Chinese equities in general.