Fallout from China protests on COVID policy unclear - PIMCO

By Yoruk Bahceli

Nov 30 (Reuters) - It is unclear how protests over lockdowns in China might affect Beijing's COVID strategy but PIMCO, one of the world's largest asset managers, is focusing on the impact of the unrest on the economy's re-opening, its head of fixed income told Reuters.

PIMCO has not made a significant shift in Chinese investments recently, Andrew Balls, chief investment officer for fixed income, said. PIMCO declined to comment on what would prompt a change.

Rare protests across China over Beijing's zero-COVID-19 policy have unleashed a fresh wave of political uncertainty in the world's second largest economy.

Some foreign investors reckon that could hasten its reopening, lifting COVID restrictions and such expectations have helped boost world share markets this month.

Asked whether the protests in China change PIMCO's thinking on Chinese investments, Balls said the firm's focus was on the impact of the protests on China's re-opening and growth trajectory.

"The extent of the shift in terms of the COVID strategy is very important. It seems like it's not super clear how that is going to play out over the next six months," Balls said.

On broader bond markets, Balls said PIMCO maintained its view that bonds are becoming more attractive again.

Ten-year bond yields from the United States to Britain and Germany have surged 200 basis points this year as global central banks embarked on the sharpest interest rate hike cycle in decades to combat red-hot inflation.

"This is the sort of environment where we think the long-term outlook for fixed income looks very good but tactically we want to keep our options open to be able to respond to events," Balls said.

PIMCO is currently neutral on duration -- interest-rate risk -- and cautious on corporate debt exposure, Balls said

"It's been a while since we've seen a default cycle. We're not sure central banks will be able to run to the rescue given where inflation is," he said.

Balls added that PIMCO's bond funds prefer asset-backed securities which are more remote from default risk, and financial corporate bonds. (Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe and Alexandra Hudson)