Fund Managers Continuing to Invest In China

Regional Investment Shows Investor Confidence Growing Rapidly In Critical Markets

Fund managers have recently helped kickstart China’s stock market, which has slowed down as a result of the economic downturn. In tandem with the recent federal stimulus packages, it appears that China’s economy is warming up quickly relative to other emerging economies, which remain sluggish. Fund managers throughout Asia have noted the attractiveness of the Chinese market as it looks to be one of the quickest to get back on a growth track. In Malaysia, which watches China’s stock markets closely and has strong economic links to Greater China, an article today reflects the bullish mood of fund managers who are putting their investments in vehicles throughout Asia:

The influx of new money —in the wake of subsiding redemptions —started as early as the end of last year.

It was interrupted by massive redemptions when sentiment soured in March but investors resumed their buying last month to fuel a rally that has lasted eight weeks — the longest winning streak in more than a year.

Markets in Hong Kong and Shanghai are up 27.3 per cent and 41 per cent, respectively, since January.

The improved investor sentiment is due to “the tentative early signs of stabilisation in the economic data”, said Andrew Hua, director for investment and strategy at Deutsche Bank Private Wealth Management.

In mid-March, the private wealth management arm became a little less defensive and shifted some of its cash into shares, he said.

Hugh Young, chief executive of the Asia-Pacific arm of Aberdeen Asset Management, said: “We did add to some hard-hit stocks earlier in the year… stocks have rebounded strongly. We’ve been pretty fully exposed to Asia in our global funds and run our funds fully invested.”

David Lee, managing director of Ferrell Asset Management, a Singapore- based hedge fund, said he started to put in money in January and February.

“It was the best time to increase Asian allocation in risky assets such as property. Sentiment was very bearish; valuations of some stocks became very attractive,” he said.

But fund managers are turning cautious again in the face of the recent run-up in stock prices, saying that a correction may be on the cards.

“Capital inflow may still continue but not in such a rapid way that we’ve seen,” said Ferrell’s Lee.

Aberdeen’s Young said: “Markets should pull back, given economies and earnings are under pressure still.”

Inflows to Asian funds fell 16 per cent to US$794 million last week from the week earlier, said Chu in a report. “From a short-term perspective, inflows are peaking out.”

The increasingly upbeat attitude of fund managers and casual investors alike is mirroring the rise in consumer confidence in China. As China begins its emergence from the global economic crisis sooner than other emerging economies like India, wealthy investors are snatching up attractive hard assets — as we have reported recently — and driving growth in industries that have taken hard hits in the last year, like luxury products, jewelry, art and antiques, and automobiles.

And as we have also written recently, expect to see a significantly larger percentage of Chinese buyers at upcoming Hong Kong auctions, from the big, Christie’s-level auctions to the smaller regional auctioneers. It is shaping up to be a very interesting summer in the contemporary Chinese art, Chinese antique, and modernist Chinese art and sculpture markets.

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