London, 4 February 2008 – Chinese equity markets are well-placed to withstand a US recession as we enter the year of the Earth Rat, although investors should expect increased volatility, say the managers of three of the largest China funds available to UK savers.
Of the China equity funds listed on
Fidelity FundsNetwork™, the average return during the last twelve months was 29%*, more than justifying 2007 as the year of the Golden Pig. Flows into China equity funds on FundsNetwork surged by 237%**. And despite turbulence on world equity markets, FundsNetwork has seen no lessening of appetite among UK savers for such investments so far in 2008.
Three managers of China equity funds with a combined value of more than £3.3 billion*** are unanimous in their view that the country’s economy is well-positioned to weather a downturn in the developed world. The recent sell-off on equity markets has also given rise to some attractive opportunities, say the managers of Fidelity China Focus, Jupiter China and Gartmore China Opportunities.
Martha Wang, Fund Manager Fidelity China Focus Fund, comments: “In the near term, the slowdown in the US is unlikely to significantly impact on China. It may actually benefit China, by reducing the need for more aggressive monetary tightening, and supporting the focus on more sustainable, domestically-driven growth. In terms of risk, inflation is a concern, as consumer prices rose quite strongly over 2007. This increase was primarily due to rising food prices, which I expect to abate, but I am also seeing signs of rising asset inflation. I am slightly concerned as this could lead to a slowing of key economic factors.
“I am finding opportunities within the consumer, healthcare and infrastructure space. In particular, I favour the underlying industry dynamics within these areas. In the near term, markets could see increased volatility given further macroeconomic tightening measures and a potential slowdown in the US. However, long-term fundamentals in China remain intact and I look at periods of weakness as buying opportunities.”
Philip Ehrmann, Fund Manager of the Jupiter China fund, comments: “In contrast to the well trumpeted concerns about the weakened state of the global economy, China’s problems appear to be the reverse – too much growth. Exports have held up, while domestic activity has been robust. As a result GDP growth for the year just ended is expected to exceed 11.5% with inflation remain close to an 11-year high. As a result the Chinese authorities are continuing their tight monetary policy in an attempt to rein in excess liquidity deemed to be circulating within the economy. Although these measures have had limited success to-date, they do suggest the pace of growth, or rather its sustainability, is a very real concern for the authorities in Beijing. In this instance, however, it has been a question of preventing overheating rather than meltdown!”
Charlie Awdry, Fund Manager of the Gartmore China Opportunities Fund, comments: “Although the US is still the world’s largest economy, global dynamics have changed and the Chinese economy became the largest growth contributor in 2007. Recent data releases indicate that the Chinese economy expanded by 11.4% in 2007, reaching its fastest growth rate in 13 years. While acknowledging the more volatile market environment, Charlie Awdry, Fund Manager of the Gartmore China Opportunities Fund, highlights that selling has taken place across sectors in a largely indiscriminate manner. “I believe that de-rating has been excessive in China, and not commensurate with the tighter monetary policy environment announced in December.”
China equity funds available on FundsNetwork
The first Chinese equity fund was available on FundsNetwork in 2000, the year the platform launched. By the end of 2007 there were 10 funds in this asset class available on the platform.
- Fidelity China Focus Fund
- First State Greater China Fund
- Gartmore China Opportunities Fund
- Fidelity Greater China Fund
- HSBC Greater China Fund
- Invesco Perptual Hong Kong & China Fund
- Jupiter China Fund
- Neptune China Fund
- Schroder ISF Greater China Fund
- Threadneedle China Opportunities Fund
2008 – Year of the Rat
According to the Chinese Zodiac, the Year of 2008 is a Year of the Rat (Earth), which begins on February 7, 2008 and ends on January 25, 2009. A Rat Year is a time of hard work, activity, and renewal. Ventures begun now may not yield fast returns, but opportunities will come for people who are well prepared and resourceful.
FIL Limited (“FIL”) and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US. The FIL Organisation manages a total of £150.9 billion of assets****.
Notes to editors:
* Data Source - © 2007 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers;
(2) may not be copied or distributed; and
(3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of this information. Figure calculated by adding the 12 month returns between 29.01.07 and 29.01.08. Of the 9 specialist China funds currently available on FundsNetwork with a track record of this length and dividing by the number of these funds. The funds available are Fidelity China Focus Fund, First State Greater China Fund, Gartmore China Opportunities Fund, Fidelity Greater China Fund, HSBC Greater China Fund, Invesco Perpetual Hong Kong & China Fund, Jupiter China Fund, Neptune China Fund, Schroder ISF Greater China Fund, and Threadneedle China Opportunities Fund. Performance figures are calculated on a nav-nav basis with net income reinvested for onshore funds and gross income reinvested for offshore funds.
**Source: FundsNetwork. Sales are for the Gregorian calendar year 31.12.06 to 31.12.07.
***Source: FundsNetwork as at 29.01.08
****Source: Fidelity. Assets as at 31.12.07 are those of FIL Limited.
FundsNetwork, Fidelity’s online investment supermarket, was launched in June 2000. It offers investors the ability to plan, invest, manage and monitor their investments in one place. FundsNetwork is the only investment supermarket used by both direct investors and financial advisers (and their clients). Investors or their advisers can select from a range of over 1000 funds from 60 fund managers (an overwhelming proportion of UK mutual funds) - and buy them online. Any opinions expressed are made at the time of writing and can be subject to change without notification. The value of investments can go down as well as up and an investor may not get back the original amount invested. For funds that invest in overseas markets, changes in currency exchange rates may mean that the value of your investment goes up or down. Investments in small and emerging markets can be more volatile than other more developed markets. Past performance is not a reliable indicator of future results. The FundsNetwork service is offered and managed by Financial Administration Services Limited. The Fidelity China Focus Fund is a sub-fund of Fidelity Funds which is an open-ended investment company established in Luxembourg with different classes of shares. The UK distributor of Fidelity Funds is FIL Investments International. The world's investment specialist: These figures reflect the resources of FIL Limited (FIL) and its subsidiaries, and FMR LLC and affiliate and its subsidiaries. Source: FIL and FMR LLC as at 31.12.07. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity, Fidelity International and Pyramid Logo are trademarks of FIL Limited. FundsNetworkTM is a trademark of FIL Limited.
