Premier China Enterprise fund manager Fen Sung expects growth to continue at 8 per cent in China and says since the change of government in 2012 the markets are more buoyant.
China’s markets took a hit for much of last year as economic growth dipped below the 8 per cent mark and fears persisted that the country was headed for a ‘hard landing’. However, markets started to recover at the close of 2012 when investors became more confident that the new government would support long-term growth.
Sung says: “The change of government has occurred [and] it was a very smooth transaction which helped markets become more buoyant in the last quarter of 2012. Officially the new government will come into place in March.”
He adds in terms of policies, they are very similar to the last policies. Major investors can now see there has been a smooth transition between the two sets of policymakers and are considering returning to the world’s second largest economy.
“I believe the Chinese market will be more looked at in terms of valuations,” he adds. “China is very attractively valued compared to other Asian stock markets.”
The manager holds an overweight position in China at 58 per cent. He is underweight Taiwan, with 6 per cent exposure against the benchmark’s 27 per cent.
The reason for being underweight Taiwan, he explains, is because Taiwan is made up a lot of technology and telecom stocks. The manager describes these as “expensive and boring” – great in a difficult market but not as attractive in today’s growth market.
In US stocks, Sung holds 6 per cent compared with the benchmark’s zero. US listed technology company Qualcomm is a stock which he has added due to an increase in demand for the smartphone in China.
China sells 10 million smartphones a month and Qualcomm is one of the largest chip designers in the world, with its chips being used by Apple, Samsung and HTC smartphones.
“Market penetration wise, only 25 per cent of people use smartphones [but] now everybody wants a smartphone,” says Sung.
He remains positive on auto stocks, holding Brilliance China, a joint venture with BMW, in his top-ten positions.
“Currently China sells approximately one million cars a month. In Beijing people have to enter a lottery to buy a car in odder to limit how many people own a car. This is not going to stop people wanting a car.”
Sung remains underweight in financials, as he does not hold any Chinese banks due to debt concerns. However, he has some exposure to Hong Kong banks and Chinese investment banks.