Equity investments in China are set to deliver solid returns in the next 12 months despite a strong 2006, suggests several investment houses.
New Star Investment Funds, HSBC Investments, and Atlantis Investment Management all disagree with analysts who argue the investment potential of the nation may have already peaked.
New Star sayseconomic growth in China has attracted foreign investors and fuelled strong gains in the stock markets of China and Hong Kong.
Ian Beattie, manager of the New Star Pacific Growth Unit Trust, says: “Heavy investment has been made in fixed assets and infrastructure, with the urban residential property market also expanding quickly.
“The crucial dynamic is urbanization. Globalisation and outsourcing have turned China into the workshop of the world, drawing workers from less productive, agricultural pursuits in the countryside into manufacturing in towns and cities: just like Britain in the Industrial Revolution.
“New jobs create new wealth and new consumers,” he adds.
HSBC Investments says Chinese equities performed exceptionally well during 2006, and expects that to continue.
Christian Deseglise, global head of emerging markets business, says: “Healthy fund inflows are likely on the back of an expectation of further Renminbi appreciation and substantial tax savings; a consequence of the Government’s corporate tax reforms.
“The completion of the A-share reforms will reduce barriers to mergers and acquisitions, unlocking company value, whilst the Beijing Olympics in 2008 should provide a further boost to market sentiment.”
At the same time, Atlantis Investment Management suggests it won’t be long before the investment world views China as a separate asset class.
Yang Liu, managing director, said: “As the economy continues to grow, investors are beginning to treat China as a separate class in its own right rather than as part of a general investment in Asia.”
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