Investors need to diversify beyond commodities and towards financial services if they are to benefit from the long term Chinese growth story, according to UBS Global Asset Management senior asset allocation strategist Michael Karagianis.
Speaking at this year's Association of Superannuation Funds of Australia (ASFA) conference in Perth, Karagianis warned Australian investors that the positive impact of Asian economies on commodities was "cyclically peaking".
"The perception that China will forever absorb commodities will evolve and investors need to look at industries that will provide a benefit as these economies develop. The stella growth will be in financial services," he said.
"People forget that the Chinese demographic story looking ahead is awful. The one-child policy has meant that China has the worst demographic profile of most countries over the next 20 years."
Karagianis said this meant China's labour force would begin to shrink over the next five to 10 years leading to a society that increasingly needed to save and invest.
"The state does not provide pensions or healthcare so the population will need to save and invest. To access the economic growth story investors will have to change their focus away from commodities and towards financial services."
However, Karagianis was still positive about the growth of Asian emerging markets and expected emerging markets shares to offer good residual returns over the next three to five years.
China's one-child policy was introduced in 1979 as a means to curb the country's soaring population growth. According to some estimates the policy has prevented at least 250 million births since 1980.
