Lloyd George Eastern Opps manager believes country will survive slowdown
China is the only country able to withstand the global slowdown, according to Adaline Ko, manager of Lloyd George Eastern Opportunities.
Ko, who is generally positive on the Asian markets, has reduced the portfolio cash position from its maximum of 10% down to 3% over the past month.
She now has a double index weighting in China to capture what she sees as its continuing growth momentum.
Ko said: 'It is displaying 7% growth when the rest of the world markets are slowing. I believe we will see this sort of growth in China for the next five years because, although its export market is important, its domestic market is huge.'
Among the positives for China are improving corporate returns, good value in stocks, stimuli from government fiscal policy and consumer spending, according to Lloyd George.
In addition, the country is close to World Trade Organisation membership and Ko said China is profiting from a flood of foreign investors entering the market. She added: 'The whole culture, the whole attitude in China is changing. Companies are behaving much more responsibly as they know they have to attract foreign investment.'
A favourite investment of Ko's is Denway Motors, which, through its subsidiaries, manufactures, assembles and trades motor vehicles, automotive equipment and parts in China. The company also manufactures and trades audio equipment in Hong Kong.
The fund, which holds 60 stocks, is overweight in Hong Kong, as this market is a net beneficiary of China, Ko said.
Interest rate sensitive stocks such as banks and properties are looking particularly interesting to Ko.
She said the property market is not moving at the moment but is only being held back by poor sentiment, which she expects to change.
Falling mortgage rates in Hong Kong now mean that for the first time, it is cheaper to buy property than to rent, she said.
Ko is keen on the small to medium sized banks in Hong Kong due to the government's encouragement of mergers in this sector.
Taiwan is another favoured market for the portfolio and Ko is attracted by low valuations due to the country's underperformance relative to other cyclical markets.
At present the market is trading on a P/E of 14 times whereas the five-year average is more than double that.
She said that although Taiwan will suffer in the short-term because of its exposure to technology, she is positive on this sector in the mid to long term. Taiwan is also a positive story for Ko, as is Korea where she said corporate governance is improving.
Ko controls risk in the fund by holding no more than 10% in any one stock or in cash.
She invests no more than 25% in larger countries such as Taiwan and no more than 15% in the smaller Far Eastern markets.
The fund is ranked 18 out of 73 funds in the Far East ex Japan sector over the year to 30 May 2001, having returned -0.3% compared to the sector average of-8.8%. Investment Week 18 June 2001
£92bn transferred since 2015
Achievements, charity work and other happy snippets
Since first announcement