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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (14847)	11/4/2004 2:01:47 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Around Asia's markets: Investing in China's consumer potential Lu Wang Bloomberg News Friday, November 5, 2004 Philip Ehrmann, whose Gartmore China Opportunities Fund has risen 14.7 percent in the past three months, is increasing his investment in Chinese retailers such as Wumart Stores, anticipating that China's economy will remain the world's fastest growing in 2005. . A rise in personal income in China will stoke consumer spending and spur profits at electronics stores and supermarket chains, said Ehrmann, who is based in London. The economy probably will expand 7.5 percent in 2005 after growing about 9 percent in 2004. . Ehrmann said his optimistic outlook for companies, including Wumart and Lianhua Supermarket Holding, was not affected by the Chinese central bank's decision on Oct. 28 to raise interest rates in order to curb annual inflation of 5.2 percent. . "It's the consumption part of the economy that we are looking at," Ehrmann said. "The reality is most companies are borrowing at significantly higher rates than the one-year lending rate" of 5.58 percent, he said. . Ehrmann sold shares of Angang New Steel and Aluminum of China on concern that commodity prices are poised to fall after reaching the highest levels since at least 1995. . The $175 million Gartmore fund, which started 21 years ago in Britain, has been open to U.S. investors since July. The fund has risen at an average annual rate of 8.7 percent during the past five years, compared with a 2.3 percent decline in the Standard & Poor's 500 index. . . "These funds have been money magnets," said Brad Durham, managing director of EmergingPortfolio.com, a research firm in Cambridge, Massachusetts. . About half of the $5.28 billion that poured into Asian funds invested outside Japan went to China funds last year, he said. . Not everyone is bullish on China. The country faces rising commodity costs and many industries are fragmented, said Adrian Mowat, an equity strategist at JPMorgan Chase in Hong Kong. . "The probability of earnings downgrades remains very high," Mowat said. "You have costs going up and no pricing power." . Wumart's third-quarter profit rose 54 percent to 23 million yuan, or $2.8 million, from a year earlier, as sales climbed with the opening of 22 new outlets. Wumart has 451 stores in Beijing and neighboring cities. . Ehrmann is buying shares of retailers in anticipation that Chinese citizens will spend more on clothing, appliances and vacations. . Prime Minister Wen Jiabao told lawmakers in March that the government would focus on stimulating consumer spending and narrowing an income gap between urban and rural residents. . The Gartmore fund in September bought 2 percent of Gome Electrical Appliances Holdings, China's biggest electrical appliances chain. Since June, the fund also added shares of Lianhua Supermarket, a grocery-store operator based in Shanghai, and Li Ning, a seller of sportswear. . Ehrmann, who oversees about $1 billion of emerging markets investments at Gartmore, does not invest directly in China's domestic markets because of restrictions on capital flows and concerns about corporate governance. He prefers Hong Kong as the gateway, where about 180 mainland companies are listed. . The city also is reaping the benefits from China's decision to ease restrictions on allowing its residents to visit Hong Kong, Ehrmann said. . His fund has bought shares this year of Lifestyle International Holdings, owner of Hong Kong's Sogo department store, and Hongkong Land Holdings, the biggest landlord in the city's central business district. . iht.com