Emerging markets guru Mark Mobius is becoming increasingly bullish on China, seeing it as best placed to lead Asia out of the recession.
Franklin Templeton's executive chairman and manager of the Templeton Emerging Markets Investment Trust says moves by the Chinese government to boost domestic consumption, including tax incentives and subsidies on certain goods will drive China's GDP growth to 8% this year.
The stimulus package announced in November included transport infrastructure, rural electricity and gas facilities, low-rent housing, agricultural subsidies and minimum income support.
Mobius says the renminbi is currently undervalued on a price parity basis, which applies pressure for it to strengthen against the US dollar.
Mobius is holding strong positions in consumer staples like food and clothing, electronics and white goods.
His portfolios are still overweight banks and energy, which though still his largest sector, has come down since July, when it was 36% of the fund, to 30%, but he says this is down to prices rather than selling holdings.
Similarly materials have come down from 18% of the portfolio to 15%, again due to price.
He expects the property market to start to recover, leading to more opportunities in real estate.
With strong declines in inflation, he says policymakers in China have become more confident, leading to aggressive interest rates cuts, which will continue.
Mobius adds: "One of the constraints on inflation has been the crunch in trade financing which became a global problem, but as a result of new support from Beijing, this problem seems to have eased."IFAonline
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From 1 March