Monday, June 21

BlackRock Jeff Shen says tariffs helped spark China’s slowdown

BlackRock’s Jeff Shen said the escalation of trade tensions and the imposition of tariffs between Washington and Beijing have exacerbated China’s financial woes as it works to modernize its economy.

“I think tariffs were a bit of a catalyst. China is going through a deleveraging process, is going through a repositioning of its economy. … It’s a bit of a transition and the tariff certainly doesn’t help,” Shen, Blackrock’s co-head of systematic active equity, said during an interview with CNBC’s Leslie Picker.

“If (the) tariff was not there, the economy could have gone through a bit of a transition with a bit of a cushion. But the cushion’s been taken out and the transition is becoming a bit rocky,” said Shen, who was at the annual Sohn conference in San Francisco on Monday.

As the world’s largest asset manager, BlackRock now oversees approximately $6.4 trillion. The firm has steadily invested more in its active equity business, committing tens of billions of dollars to quantitative and data science.

Shen said those novel types of technologies help BlackRock monitor economic activity across the globe, including in China, where analysis of satellite imagery isn’t painting a rosy economic picture.

“We do see a significant slowdown. I think the slowdown certainly started in the second quarter and that sort of permeated a bit into the summer and I think that has continued on into September and October,” said Shen. “We track how global companies talk about China, just to get a sense of outside looking in to see how global corporations are thinking about China. Their stance, which was reasonably stable in the summer, was certainly seeing a bit of a slowdown worsening off.”

In its most recent earnings report, the company’s assets under management jumped 8 percent in the third quarter. Its shares are down nearly 24 percent since January. But despite turbulence in U.S. and Chinese markets, Shen stressed that investors can mitigate their losses — and even position themselves for a good buying opportunity — if they take the proper steps.

“I think risk management, diversification is quite critical in the current environment. From an investment horizon perspective, it’s also important for investors to keep a long investment horizon,” he said. “There are many things going on in the U.S. and not putting all your eggs in one basket is probably the right way to go.”

The Sohn conference is the West Coast version of the investment conferences that began in New York and are best known for hedge-fund managers making market-moving presentations. The Sohn conferences benefit pediatric cancer and other causes for underserved youth. The conference is presented in partnership with CNBC.

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