Gartmore's Charlie Awdry adds to Chinese exporters

China's Year of the Tiger 2010 starts on a firm footing, with data released this week showing HSBC's purchasing managers' index rising to a new record high and export orders increasing at a "near-record" rate in January.

The picture is marred by China's first concrete steps of tightening economic policy - Beijing told banks to raise their reserve ratios last month.

However, Charlie Awdry, manager of Gartmore's award-winning £692m China Opportunities Fund, believes some tightening is understandable and that recent events may present a good entry point for investors.

"This tightening comes against a backdrop of an improving domestic economy, signs of improvement in the rest of the world and evidence of over exuberance in some domestic asset markets such as property," says Charlie.

"A hike in the bank reserve requirement and strong words from the authorities are responses to the typical front-loading of lending by banks in the early stages of the year. These measures are akin to the authorities gradually taking their foot off the accelerator."

However, Charlie is encouraged by the government's expansionist stance and absence of bubble-like stock valuations.

"The Hang Seng China Enterprises Index trades on just 12 times this year's earnings, which is undemanding by historical measures or compared to other major world markets," added Charlie.

"The government's pro-growth tone appears not to have changed so we would not expect a tightening of policy that goes so far as to cut into China's continuing expansion. We're finding many areas of value and scope for unexpected earnings growth that support the case for investing in China this year."

Gartmore's China Opportunities Fund is structured in anticipation of the recovery continuing, with overweight positions in the consumer discretionary, consumer staples, energy and technology sectors.

"We've focused fairly consistently on growth trends in domestic China over the last three to four years but, with signs emerging of a recovery in the rest of the world, we've moved to an overweight in export plays too. One example would be the global trade sourcing business, Li & Fung, which has just won orders from Wal-Mart worth US$2bn in the first year," says Charlie.