Magellan chairman Hamish Douglass calls for end to ‘xenophobic’ debate on China

Magellan’s Hamish Douglass has accused parliamentarians of whipping up ‘xenophobic’ sentiment about China.

Magellan group chairman Hamish Douglass remains bullish on investing in China. Picture: Britta Campion

Magellan Financial Group chairman and chief investment officer Hamish Douglass has accused the nation’s parliamentarians of whipping up “xenophobic” sentiment about China and playing “national security out as a political issue”, undermining Australia’s most important economic relationship.

In an interview with The Deal magazine published in Friday’s The Australian, Mr Douglass said he expected the coronavirus outbreak would be a short-term phenomenon and that he remained bullish on investing in China.

At the first event of Magellan’s annual investor roadshow tonight in Melbourne, Mr Douglass will reveal that his firm, which now manages over $100bn of funds, has recently taken a $1bn position in Chinese internet services giant Tencent.

The position adds to Magellan’s stakes in Chinese online platform Alibaba and its exposure to China through its investments in luxury brands LVMH and Estee Lauder and the US-listed tech giant Apple, ­coffee chain Starbucks and Yum Brands, owner of fast food chains KFC, Taco Bell and Pizza Hut.

“I don’t see the coronavirus issue being in any way tied in the geopolitical and economic issues between and Australia and China. The coronavirus is largely a short term economic impact that won’t have longer term ramifications,’’ Mr Douglass said.

Echoing the warnings of former prime minster Paul Keating and Kerry and Ryan Stokes about the dangers of ­demonising China, Mr Douglass said any moves to undermine the nation’s open and productive economic relationship with its biggest trade partner “would be incredibly damaging to the long-term future of Australia”.

“It is unfortunate the political class has chosen to play national security out as a political issue.

“Socialising this through the public could harm the bilateral economic relationship,’’ he said.

“The politicians have whipped up the public discussion on it and have gone down that xenophobic pathway.

“We have been the No 1 beneficiary of China’s economic dividend. It would be nice to see some politicians putting a balanced debate about our national security and our economic interests.”

Late last year the Chinese government’s move to deny visas to Liberal MPs Andrew Hastie and James Paterson on the grounds they criticised Beijing’s human rights record and questioned its strategic ambitions further strained the relationship between the two countries.

Read more in The Deal magazine.

Mr Douglass reiterated it would be more risky not to invest in China than to be put off by any trade-war tensions with the US.

Magellan last year hired former CIA director Mike Morell as a source of intelligence on not only the Trump administration but also on China. “For the foreseeable future we will be in a low interest rate world. And you have the uncertainty created by the relationship between the US and China. Even following the phase one trade deal, the ongoing fundamental tensions will continue,’’ Mr Douglass said.

“There will be some decoupling between the US and China. The short-term uncertainty is hitting investment expenditure in many developed economies.”

Ahead of tonight’s investor forum in Melbourne, which is titled The Great Repression, Mr Douglass told The Deal that his main concern continued to be inflation.

“The No 1 thing that worries me is what happens if we really get inflation in the world. This whole thing about cutting interest rates at the end of the cycle will turn out being a huge policy mistake.”

His presentation tonight, which will be replicated in cities around the country over the next fortnight, will consider the consequences of the super low interest rate world and the opportunities and challenges of investing in China.

All proceeds from the evening will go to three charities: the Reach Foundation, Rural Aid and the Fly High Billie Foundation.

Mr Douglass also provide $5m to seed the Matthew Grounds-backed Sohn Hearts and Minds conference which started in 2016.

Through his role on the board of the Victor Chang Cardiac Research Institute, last year Mr Douglass also helped bankroll an endowment of $20m for a new professorial chair of medical research in Sydney.

Last week Magellan exceeded market expectations posting a 13 per cent increase in half-year net profit to $195.7m. Its share price has soared in the past year over the $70 mark, giving Mr Douglass’s 12 per cent stake — held Midas Touch Investments Pty Ltd — a value of more than $1.6bn.