LONDON, (Reuters) – BlackRock (NYSE 🙂 has reduced its exposure to Chinese stocks, government bonds and Asian fixed income to neutralize a small overweight. This was due to a worsening geopolitical outlook and a weakening macroeconomic outlook.

“China’s ties to Russia also have created a new geopolitical concern that requires more compensation for holding Chinese assets, we think,” Jean Boivin, head of the BlackRock Investment Institute said in a weekly note to clients.

BlackRock said that it also upgraded European government bonds from neutral to reflect its view that the market pricing for euro area interest rates hikes was too cautious given the impact of energy shocks on growth.

Boivin’s team said that they also see value in investment grade credit. Annual coupon income nears 4% — the highest ever recorded in a decade.

Asset manager said that there were “little chances of an economic miracle with low inflation and high growth.” Last week’s market rout shows investors are adjusting to this reality.”