Positive outlook for Chinese corporate earnings growth

Chinese corporate earnings growth is expected to average around 30% in 2008, according to a poll of local securities analysts carried out by the news agency Reuters.

Research from the China Academy of Social Sciences shows that the earnings of major industrial companies have increased by over 37% every year from 1998 to 2006.

Charlie Awdry, manager of the Gartmore China Opportunities Fund, believes that companies within the consumer sector will be particularly resilient as the Chinese economy faces further monetary tightening. Growth expanded 11.5% in the third quarter, encouraging officials to announce a move from a ‘prudent’ to a ‘tight’ policy framework in December. Chinese President Hu Jintao has also promised to increase incomes for rural workers and boost the role of consumption within the economy. Measures aimed at this include increasing the minimum wage and broadening welfare payments.

According to Charlie, “As concerns over the growth outlook for Western economies rise and earnings growth rates moderate, we continue to focus on domestic Chinese investment and consumer industries. In these areas, the outlook is buoyant and earnings growth picture is robust”.

Gartmore’s China Opportunities Fund returned 17.9% in the three months to 30 November and 430.9% over five years to the same date. It is ranked as the leading Fund in its sector over I, 3 and 5 years.