Investment Opportunities Continue in China - An update by Fidelity International’s Martha Wang
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* Recent reporting season confirms economic recovery
* Government policy tightening a welcomed move
* Shanghai Expo likely to benefit Shanghai tourism and infrastructure sectors
Hong Kong, 17 May 2010 – The latest round of earnings out of China were a good set of results and confirm China’s economic recovery with companies proving their ability to adjust their operations in adverse conditions during the global financial crisis, said Fidelity International’s Portfolio Manager for the Fidelity Funds - China Focus Fund, Martha Wang.
“Recent results were mostly solid and in line with expectations, with key earning drivers coming from the financial, capital goods and utilities and they confirm that China’s economic recovery is indeed spilling into local company performance,” she said.
“If you take MSCI China, earnings growth was about 16% year-on-year on the back of a 4% increase in revenue,” she said. “But the point to make is that some quality companies differentiated themselves in a volatile micro-environment in 2008 and 2009.”
Ms Wang, who has managed the US$4.5 billion Fidelity Funds - China Focus Fund since 2006, said she welcomed recent moves by the government to introduce tightening measures to cool down the economy and the property market.
“I have been underweight property for quite some time as the environment wasn’t sustainable and it needed to consolidate. When I look at the property sector now, it’s becoming increasingly interesting and I plan to revisit this sector at some point this year.”
Ms Wang said she pursues investment opportunities in China based on three key positive structural dynamics. The first dynamic is China’s consumption potential, the second is the economic dynamic spilling over from coastal China to inland areas, and the third is the industrial upgrading and consolidation of the Chinese industry.
While Ms Wang said the Shanghai Expo will go a long way in promoting China internationally, she doesn’t expect too many economic benefits to flow through to the rest of the country. However, she said tourism and the infrastructure sector around Shanghai will benefit.
Given the latest economic recovery seen in China, she said: “A revaluation of the renminbi and a return to the previous foreign exchange mechanism is just a matter of time. In my view, the renminbi will very soon resume the previous managed floating foreign exchange system.”
With respect to sectors presenting the most interesting investment opportunities, she said: “The long-term urbanisation and the subsequent consumption factors are important stories driving holdings in my portfolio. Therefore, I am currently overweight consumer, IT, healthcare and insurance names in my portfolio.”
To hear an in-depth interview with Martha Wang, listen here
About Fidelity International
Fidelity International is an affiliate but separate company to Fidelity Investments and provides investment products and services to individuals and institutional investors outside of the Americas. Fidelity International has been in Asia for 40 years with offices in Japan, Korea, Australia, Hong Kong, Taiwan, Singapore, China. Fidelity International manages US$215.9billion Assets Under Management (as at 31st March 2010), has over 6 million customer holdings and manages 937 funds. Fidelity International has one of the largest proprietary research teams in the world, providing insights into around 90% of the world's stock markets (as measured by the Morgan Stanley Capital International World Index, 31 March 2008).
In Hong Kong, FIL Investment Management (Hong Kong) Limited currently offers more than 80 mutual funds to investors directly and through over 100 distributors, including retail banks and insurance companies. Fidelity in Hong Kong is the largest provider of the ORSO (Occupational Retirement Schemes Ordinance) Member Choice Defined Contribution Scheme and is also one of the top ten MPF (Mandatory Provident Fund) scheme providers in Hong Kong and has been awarded Asia Asset Management’s “Best of the Best Country Awards: Winner award for Hong Kong Best Client Servicing for MPF” in 2004, 2005, 2007 and 2008. In 2010, Fidelity was named “Hong Kong MPF Schemes Provider” by Asian Investors as well as winning “Best Equity Pension Group” and Best Mixed Asset Pension Group” over three years in Lipper Funds Awards.
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.Source: Towers Watson Manager Watch, as at 31 December 2009.
.Source: Towers Watson MPF Performance Book, as at 31 December 2009.