Fund managers are urging investors to look at Asian equities that offer attractive prices and potential good returns.
China’s rate of growth may have slowed, but this is not a result of poor economic performance but due to infrastructure projects coming on line.
Analysts reckon the current rate of growth at 7% -9% reflects the real return from investing in China and that growth in past years has profited from the premium of investment in infrastructure.
Khiem Do, Head of Asian Multi Asset at Barings, said: “The region’s balance sheet is healthy with low levels of external debt, corporate debt levels at close to 25-year lows, and a non-leveraged banking sheet. While valuations are not yet at bargain levels and may fall further given the deepening European financial crisis, the earnings per share (EPS) of domestic Chinese companies are at a record high and the market is deemed cheap given the long-term investment potential on offer.
“China is still showing solid GDP growth, albeit at a lower rate than the past two decades. Part of the reason for this is that China’s infrastructure boom is now slowing as major projects are completed. As the country becomes more developed, there are likely to be fewer projects in the future.”
Meanwhile, Skandia Investment Group believes the Far East represents some significant buy opportunities for investors.
Chief investment officer James Millard believes equities are cheap but is waiting for signs that the global economy is performing better before taking a more aggressive position.
“There is no doubt that valuations on some equities present an opportunity if you are prepared to accept short term volatility. We are especially positive on the outlook for Chinese equities as we expect growth to climb from here. Further loosening in both monetary and fiscal policy, facilitated by inflation falling to well below 3% over the next few months, support our expectations for stronger growth in the second half.”
