Could the Tiger signal China’s most powerful year yet?
Could a combination of ongoing growth, a stock market that does not yet reflect its economic influence and the overwhelming potential of economic development make the Year of Tiger the most powerful yet for China? asks Fidelity International.
As a destination for investment, the popularity of China focused funds is certainly on the rise. Sales in 2009 via Fidelity's fund platform, FundsNetwork, increased by 59%, while sales into Fidelity's China Focus Fund alone increased by 239%. As the 14th February 2010 marks the Chinese New Year, investors may be hoping that the powerful energy which comes during the year of the Tiger and its association with Tsai Shen Yeh, the Chinese God of Wealth, will lead to positive performance in their investments.
Rob Fisher, Head of UK Personal Investments at Fidelity International said: "The Chinese New Year coincides with a point in time when things are really hotting up for China. This is apparent in the growing popularity of China as a region for long term investment. In fact, we can see from money coming onto Fidelity's fund platform - FundsNetwork, that investors have really begun to wake up to the exciting prospects offered by China.
"As we enter the Year of The Tiger, China offers investors the opportunity for long term growth where skilled fund managers who have access to in-depth research can capitalise on this increasingly exciting story.
"The increasing popularity of Chinese Funds also coincided with strong performance - with the Morningstar China Equity sector returning 69% over the last year. With the year of the Tiger also associated with being active and seizing opportunities - this may be the year when investors make the most of the long term investment opportunity that China offers. With this in mind, Fidelity has gathered expert options commenting on China as an investment case:
The Fund Managers' Views:
Anthony Bolton, President of Investments, at Fidelity International said: "There are three fundamental reasons for my excitement about China: I think its ongoing growth will be increasingly attractive in a generally slower-growth world in the wake of the financial crisis; China's stock market is also under-represented in global terms compared to its significant economic influence; most of all, I am attracted by the potential trajectory of China's economic development, which is similar to that experienced by countries like Taiwan, Korea and Japan 20 or 30 years ago - but on a much larger scale.
"My enthusiasm for China is long-term and I believe fears over the inflationary outlook and a potential asset price bubble are overstated."
Charlie Awdry, Fund Manager of the Gartmore China Opportunities Fund said: "The Chinese economy has shown incremental improvements over recent months. Importantly, government subsidies have been successful in catalysing consumer demand. At the same time, growth recoveries have begun to take hold in the US and Europe and these should lead to stronger Chinese exports.
"There are risks. China's move in early January to raise its reserve requirement for domestic banks represents an attempt to control the amount of money flowing into the market. This is the first official monetary tightening we have seen and we expect to see more this year. However, the Hang Seng China Enterprises Index is not expensive, either by historical measures or compared to other major world markets today. We continue to find areas of value and scope for unexpected earnings growth that help to underscore the case for Chinese equities this year."
Philip Ehrmann, Joint Head, Far Eastern Equities Team, Director, Jupiter Asset Management Limited said: "We expect the Chinese economy to remain strong, with GDP growth once again in the 8% to 9% range this year. The economy's progress, however, is unlikely to be smooth but rather interspersed with inflation scares and worries over quarterly growth comparisons. This should provide investors with opportunities to increase exposure to China's strong growth story."
Louisa Lo, Head of Asian Equities at Schroders, said: "We believe that a tug of war between tightening and liquidity will be key to the direction of Chinese equities in 2010, with the markets very sensitive to any policy talk or any indication of tightening.
"Given our less sanguine view about the global economy, we continue to take a more defensive stance, focusing on good quality domestic names, which offer better valuations and visible and solid earnings growth"
The Adviser's View:
Brian Dennehy at IFA Dennehy Weller & Co said: "It seems like every week for the last 10 years or so some pundit or analyst has stated that China is about to go pop. The reality is that China is on a journey to modernise its economy, and the skill and determination of the Chinese authorities, which has been evident for many years, has been underestimated by most global investors. Our clients have been increasingly aware of the power of China, and 1.3billion Chinese citizens, as an economic force and driver of investment returns - not just within China, but in other economies and stock markets and amongst commodities. And it is estimated that by 2035 China will be 17 times as big as it was in 2004, so it can be argued that this development is in its relatively early stages.
"The irony of the success of the Chinese economy is that the plan for this centrally controlled country is driven by economics, not politics or vested interest as is more often the case in developed economies. Valuations for Chinese stocks were unjustifiably high in late 2007, and equally irrationally low early in 2008 - now they are in the middle ground and valuations of themselves should not be a concern."
Best Selling China Funds 2008-2009 via Fidelity's fund platform, FundsNetwork
Gartmore China Opportunities Fund
Fidelity China Focus Fund
First State Greater China Growth Fund
Jupiter China Fund
Invesco Perpetual HongKong & China Fund
Morning Star China Equity Performance:
1 year: +59.62%
3 year: +14.97%
5 year: +23.59%
For more information, visit fidelity.co.uk.