China looks a great bet for those seeking long-term returns
CONAL GREGORY
CHINA celebrates its new year on Thursday. Amid all the festivities, many savers inside China and overseas will be wondering how far the new dawn will be an appealing investment firecracker.
The world’s most populous nation - with 1.2 billion people - has fostered many entrepreneurs keen to obtain stock exchange listings for their companies, to raise finance and to gain more exposure. In turn, non-Chinese brand owners view such a large developing population with excitement.
Investors have seen a buoyant economy in China. As the year of the goat gives way to that of the monkey, growth of 8.5 per cent is expected - the highest expansion for six years.
It is not only domestic demand that is fuelling the economy at present - exports jumped 34.6 per cent, the highest since 1979, when China opened it borders to trade with the rest of the world.
China is now the fourth largest exporter in the world, behind the US, Germany and Japan. Yet, such enthusiastic figures should be tempered both by the effects of recent SARS outbreaks and by the unemployment warning recently issued by the China Academy of Social Sciences. The latter said job creation would be vital as the population aged 15 to 59 years grows from 800 million to 920 million by 2020.
Edinburgh Dragon with £250 million capitalisation is the largest Asian investment trust. It invests 33 per cent in China. The fund increased 45 per cent in value last year against a 28 per cent rise for the benchmark MSCI Asia excluding Japan index.
Jeremy Whitley, its Edinburgh-based fund manager, has selected mainland Chinese shares in telecommunications, oil, brewing and shoe manufacture with property, banking and gas targeted in Hong Kong.
Some shares quoted on the Shanghai and Shenzhen exchanges are restricted to local investors, but there is still enough liquidity for informed foreign stock pickers, among other equity classes and on the Hong Kong market.
Flotations continue to outstrip demand. Earlier this month savers tried to purchase more than 1,000 times the shares available in a planned HK$192 million (£13.5 million) sale by China Green, an agricultural firm.
Aberdeen China Opportunities aims for capital growth by investing in companies based in China or either invest in, or trade with, China. Tipped by private client stockbrokers Killik & Co, the fund is up 200 per cent over the past five years.
The largest holdings are in PetroChina, Wing Hang Bank, China Mobile, Swire Pacific "B" and Giordano International. Hugh Young and his team have managed the fund since 1997, keeping the portfolio relatively concentrated at 25-30 stocks.
ISIS Asset Management offers two funds with a fair proportion invested in China: Pacific Assets has 35.2 per cent and Pacific Growth 20.3 per cent. In the year to end-November, £100 has grown into £154 and £130 respectively on a bid-bid basis with income reinvested, according to Lipper research.
Mike Hanbury-Williams, director of ISIS Pacific Basin Equities, says the group "remains positive on Hong Kong property" and reveals that the Pacific Assets investment trust will add to its holding.
Jupiter’s Far Eastern unit trust has £80m assets with almost a quarter invested in Hong Kong and most of the other equities held in Japan, Taiwan, Singapore, Korea and Malaysia.
Savers can subscribe from £100 monthly or, for an ISA, from £150. It has been managed since 1995 by Lynne Ross who says on China that "the sheer magnitude and speed of this economic giant’s progress continues to impress".
However, while there is universal agreement that the long-term prospects for China are rosy, not everyone is confident that the coming year will be. The Association of Investment Trust Companies said "short term, there is a clear note of caution about current valuations".
Gerald Smith, manager of Pacific Horizon Investment Trust, sums up: "The growth of China is one of the most significant factors in the world economy and influences almost every one of our investment decisions. This phenomenon has many years to run and has massive long-term implications."
business.scotsman.com |
