Investment trust managers claim China’s spectacular growth of the past should not cloud judgement of the country’s future prospects.
The FTSE 100 fell at the start of the year after further turmoil in Chinese equity markets.
China’s CSI 300 equity index was suspended at the start of this year following just 30 minutes after opening as the benchmark fell 7 per cent - triggering automatic circuit breakers.
The drop was driven by a further fall in the value of the Chinese renminbi.
Chinese policymakers set the onshore rate at a five-year low of 6.5646 against the US dollar, and this weakness - increasingly being driven by market forces - was viewed by investors as a sign of a more severe slowdown in the Chinese economy.
Ian Hargreaves, manager at Invesco Asia, said he had just returned from a research trip to China.
He found, among other things, concerns over renminbi depreciation had contributed to recent market weakness.
Mr Hargreaves said: “I found nothing to suggest that the economy is deteriorating at a more rapid rate than we have seen so far.
“Neither did I find any evidence of new factors undermining the resilience of the consumer and service sectors.”
Howard Wang, manager at JPMorgan Chinese Investment Trust, said it was important for investors to acknowledge and be comfortable with China’s slower growth.
He said: “Many secular growth opportunities with strong multi-year prospects still exist across Chinese equities, especially in the new economy sectors of healthcare, internet, consumption and environmental protection.”
AIC Members with largest percentage holdings in China (at 31 December 2015)
Fund | Sector | China% | Hong Kong % | Taiwan % | Total % |
Fidelity China Special Situations | Country Specialists: Asia Pacific | 77.19 | 17.86 | 2.65 | 97.7 |
JPMorgan Chinese | Country Specialists: Asia Pacific | 68 | 14 | 14 | 96 |
JPMorgan Asian | Asia Pacific - Excluding Japan | 34 | 11 | 14 | 59 |
Invesco Asia | Asia Pacific - Excluding Japan | 23.4 | 20.03 | 10.71 | 54.14 |
Martin Currie Asia Unconstrained | Asia Pacific - Excluding Japan | 42.42 |
| 5.97 | 48.39 |
Pacific Horizon | Asia Pacific - Excluding Japan | 29 | 6 | 13 | 48 |
Schroder AsiaPacific | Asia Pacific - Excluding Japan | 8 | 26 | 11 | 45 |
Asian Total Return | Asia Pacific - Excluding Japan |
| 28.36 | 16.05 | 44.41 |
JPMorgan Global Emerging Markets Income | Global Emerging Markets | 13 | 7 | 21 | 41 |
Henderson Far East Income | Asia Pacific - Excluding Japan | 17.78 | 10.92 | 10.74 | 39.44 |
Fidelity Asian Values | Asia Pacific - Excluding Japan | 16.6 | 8.8 | 13.3 | 38.7 |
Edinburgh Dragon | Asia Pacific - Excluding Japan | 5.89 | 23.84 | 6.05 | 35.78 |
Scottish Oriental Smaller Companies | Asia Pacific - Excluding Japan | 14.4 | 7.94 | 12.54 | 34.88 |
Schroder Oriental Income | Asia Pacific - Excluding Japan | 3 | 19 | 11 | 33 |
Aberdeen New Dawn | Asia Pacific - Excluding Japan | 5.01 | 22.19 | 5.6 | 32.8 |
Pacific Assets | Asia Pacific - Excluding Japan | 3.38 | 10.13 | 17.78 | 31.29 |
Templeton Emerging Markets | Global Emerging Markets | 23.8 |
| 6.3 | 30.1 |
Witan Pacific | Asia Pacific - Including Japan | 12.34 | 12.21 | 4.67 | 29.22 |
Advance Developing Markets | Global Emerging Markets | 17 | 4 | 8 | 29 |
JPMorgan Emerging Markets | Global Emerging Markets | 7 | 9 | 8 | 24 |
Aberdeen Asian Income | Asia Pacific - Excluding Japan | 4.28 | 11.92 | 5.06 | 21.26 |
Utilico Emerging Markets | Global Emerging Markets | 0.45 | 20.76 |
| 21.21 |
Aberdeen Asian Smaller Companies | Asia Pacific - Excluding Japan | 3.17 | 17.15 |
| 20.32 |
Source: AIC Monthly Information Release (MIR)
Dale Nicholls, manager at Fidelity China Special Situations, said he remained positive about the prospects for China, which “continues to grow at a better pace than the developed world and personal consumption is likely to outpace this rate of growth as the economy transitions towards a consumer-led market.”
Howard Wang, manager at JP Morgan Chinese Investment Trust, said it was important for investors to acknowledge and be comfortable with China’s slower growth.
He said: “Many secular growth opportunities with strong multi-year prospects still exist across Chinese equities, especially in the ‘new economy’ sectors of healthcare, internet, consumption and environmental protection.”
Mark Mobius, executive chairman at Templeton Emerging Markets Group and co-manager of Templeton Emerging Markets Investment Trust, said: “We are not terribly concerned about growth in China, nor its long-term investment prospects.
“We would dub current 2016 projections of about 6 per cent in gross domestic product growth as quite strong.”
Ewan Markson-Brown, manager at Pacific Horizon Investment Trust, said China is “amidst its great transition from an investment led economy to a service led economy, with services growth accounting for 80 per cent to 90 per cent of recent GDP growth.”
Jonathan French, IFA at AW Financial Management in Bromley, said: “China is still growing, just not quite as quickly.
“It is part of the rebalancing of the economy to more sustainable growth as we see in the UK, which is a lower rate of growth, 2 per cent to 3 per cent, as opposed to 10 per cent.
“We are not terribly worried. Clearly China is causing a fair degree of volatility in the markets which is concerning for some but as regards long term prospects I would tend to agree with the managers.
“We don’t invest directly into Chinese funds. They’re too niche. and tend to carry more risk than we’re comfortable with but I tend to agree that these things give fund managers a potential market.”