Buy UK stocks if shopping for China growth opportunities
Investing in the East can be easier if you look home first.
Saturday 07 August 2010
if your financial adviser suggests sticking a chunk of your cash in China, don't be surprised. According to a survey of advisers published this week by Baring Asset Management, two-thirds believe that investors should increase their exposure to emerging markets, of which China is the stand-out region.
"Asian equities are highly favoured as the economies in the region are booming from increased consumer spending," points out Ian Pascal of Barings. "Over time, consumer spending is set to increase as wages rise, particularly in China."
He's not the first to talk up China. It has been mooted as the investment opportunity of the year from several quarters and there's no doubt that the country is showing positive signs. Indeed, China has shown consistent growth of 9 per cent over the last 30 years and has just taken over from Japan as the world's second largest economy, boosted recently by the Beijing Olympics and the Shanghai World Fair.
There are a range of funds investing in China, including Jupiter China, First State Asian Pacific Leaders, and Melchior Asian Opportunities, as well as Fidelity's recently launched China Special Situations fund run by the veteran manager Anthony Bolton. But people wary of investing in a region where they have little knowledge can still benefit from the potential boom in the country by investing in FTSE shares.
So says Aruna Karunathilake, manager of Fidelity's UK Aggressive fund, who has just returned from a three-week visit to China, his fifth in the last half-decade. "The FTSE is profoundly international with 70 per cent of revenue derived from outside the UK. Those companies that are going to prosper in the West are likely to be those who can sell to the Chinese and other Asian nations," says Aruna.
He was joined on the trip by Tom Ewing, who manages Fidelity's UK Growth fund, and Ewing says that it's entirely logical for UK fund managers to be interested in China. "The bulk of the growth of the big companies in the FTSE such as Diageo, Rio Tinto, Shell or Tesco is coming from emerging markets, and a really important part of that is China," he says.
"As fund managers we're excited by growth and – however kind we want to be about the coalition and what they're doing – the UK doesn't look exciting, especially when you look at consumer confidence and house prices and so on. China does look exciting, but it's only by visiting the region that you get a feel for opportunities and can be objective."
The pair have both in the past visited the main Eastern cities of Beijing and Shanghai and seen them grow from being almost building sites to fully realised modern cities. Their more recent trips have taken in some of the more remote regions which have helped to persuade them that China's growth story is set to continue for a good few years yet.
"The growth is only just beginning in China. The successful model in the Eastern cities is being migrated across the country," says Karunathilake. "Big successful companies are moving inland to where labour costs are lower and in their wake is coming more building and progress and prosperity across the country."
The progress has been aided by a stimulus package begun by the Chinese government in 2008 which has seen central investment focused towards remote areas. That's partly for political reasons as the nation's leaders are well aware of the social unrest caused by the imbalance of having massive prosperity in some cities while millions still live frugally. In short, the government has promised to bring the good times to all.
"Manufacturing has been built on labour in coastal cities and near the ports but this is starting to change," says Karunathilake. "As infrastructure improves, goods can be transported from inland factories to the ports. Migrant workers are agitating for more rights and as wages rise, it is cheaper for companies to move inland. Also, the coming generation of workers have grown up with the internet and are aware of life beyond 75 hours a week in a factory. They may not want to leave their home to become a migrant worker, so the factories are now coming to them."
Tapping into that potential through investing in UK funds is a great way to benefit from other growth areas across the world, says Ewing. "By investing in big global companies with their headquarters in London or the UK people get diversification as well, as there's exposure to interesting emerging market countries such as Nigeria or Brazil. Indeed our next trip is likely to be to Brazil to find out more about the boost that oil will bring there. But UK stocks also bring reassurance through better accounting and disclosure. A listing on the FTSE implies a decent degree of corporate governance," he points out.
Dirty tricks in a divorce can cause some nasty surprises
Weekly Money: the personal finance stories you might have missed 27 to 31 July
10 tips for taking out a personal loan
Have you checked your pension? Make sure you're not sleepwalking into problems later in your life
The most expensive cities in the world 2015
- 1 Stuart Baggs dies: Apprentice star 'The Brand' found dead aged 27
- 2 As the world mourned the death of Cecil the lion, five endangered elephants were killed in Kenya
- 3 Amazon Prime - how to cancel: after Top Gear hiring, instructions on how to leave premium service
- 4 What is halal meat and why is it controversial?
- 5 Living in Spain and commuting to London 'cheaper than actually working in London'
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
iJobs Money & Business
£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...
£19000 - £22000 per annum: Recruitment Genius: An exciting opportunity has ope...
Negotiable: Recruitment Genius: This company prides itself on its ability to p...
Negotiable: Recruitment Genius: This company prides itself on its ability to p...
Day In a Page
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.