Buy Side Dispels China Rumors
Constant criticism and skepticism over China’s policies are unfounded, according to asset manager.
As the global economy gears up for the third quarter, the emerging markets, income-generating strategies and sustainability will be among the top themes for investors, said Andreas Utermann, chief investment officer for RCM informed, a subsidiary of Allianz Global Investors.
“The emerging market will play a role in the rebalancing of the global economy,” Utermann said, speaking bullishly about emerging market bonds; many of which are trading at a premium. “We also expect the appreciation of the emerging market currencies to play a role in rebalancing global growth.”
In discussion about the prospect of the emerging market countries, global investors cannot ignore China, whose GDP has been growing at an upwards of ten percent for the past decade. More recently, Western eyes have been upon Chinese policy makers, disapproving of a possible housing bubble, inflation concerns and an overheated economy.
“China, and to some extent, India, is driving the growth in Asia,” said Raymond Chan, chief investment officer of RCM Asia Pacific. “It’s a bit unfortunate that the Western world always feels as though China’s not doing the wrong thing…if they’re growing too fast, they’re questioned on their economic numbers. If the economy is growing slowly, then you hear people say they’re going into a hard landing.”
Chan, who is responsible for all investment professionals in Asia ex-Japan, is the chairman of the regional portfolio management group in Hong Kong. Globally, RCM informed has almost 155 billion under management.
“The policy makers in China understand the challenges they’re facing; they’re one the first to cool down their economy in 2009,” Chan said, mentioning that recent money supply growth and the bank lending rates exemplify concerns over overheating and inflation concerns. The latter, for Chan, is a lagging indicator and “not a concern.”
While China is slowing in growth, Chan is betting on consumers to drive the economy.
“China’s domestic consumption is going to pick up,” he remarked, dispelling rumors of a hard landing. “They’ll deliver somewhere between ten to fifteen percent of growth.”
Consumer spending is a newer phenomenon for China. The government has had a long history of investing on fixed assets, notably, infrastructure.
“Property prices at big cities such as Beijing and Shanghai are high, but nationwide, they’re not at crazy levels,” Chan noted, due to the measures the government is making to cool down housing.
“There’s not much leverage in the property market here in China; if you want to buy property you need to put down 30 percent on your down payment; if you want buy a second property, you need to put down 50 percent.”
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New derivatives facilitate exposure to Chinese equities.