Bet on China innovation but be wary of deglobalization, says Citadel boss

Global investors should be watching and investing in China, says Citadel founder Ken Griffin, as the mainland leads in many important areas such as solar energy and electric vehicles.

"There's much more innovation outside of the United States, relative to 50 years ago," Griffin said.

The billionaire's firms Citadel and Citadel Securities are expanding in China, with Hong Kong housing its biggest office in Asia.

Citadel Securities, which focuses on market-making operations, started building out its office in Shanghai before Covid and employed about 10 people in the mainland as of March.

Franklin Templeton Investments is also keen on China again, president Jenny Johnson said, adding that some assets there are currently "trading so cheap."

But these Wall Street elites also warn of a possible crisis ahead. Griffin noted that deglobalization could be a "wild card" with a significant impact on inflation, supply chain and monetary policies.

"We don't know what a world looks like that involves deglobalization," he said, adding that economies have benefited from peace and globalization.

As for concerns about a recession, Griffin expects a slowdown in the middle of next year on the back of high-interest rates that have particularly hurt the private sector. He cautioned that the US government's "spending spree" could drive up the deficit.

"That's pulling forward consumption into the here-and-now at the expense of future generations," he said.

UBS chairman Colm Kelleher warned that the world's next financial crisis could happen with non-bank financial intermediaries, which now account for half of the global financial assets. He added: "I think the next crisis, when it happens, will be in that sector, it'll be a fiduciary crisis."

The banking regulator is "very focused on this finally" after being warned of the risk in 2019, he said.

The shadow banking sector is "a real cause of concern," he said.

Bridgewater Associates co-chief investment officer Bob Prince warned that markets are "under-discounting" how long interest-rate tightening in the US and Europe will last in the fight against inflation before an equilibrium is reached.

HSBC chief Noel Quinn noted the amount of capital inflow from the mainland into Hong Kong in the wealth management business has increased by three to four times since the beginning of the year compared to the same period before the pandemic.

The city's insurance business is also up by around 40 percent from pre-Covid levels, with a good proportion being the flow of business from the mainland, Quinn said.