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.
Compare with the Independent: See how much you could save by switching credit cards. Compare now
easyJet founder Sir Stelios Haji-Ioannou aims to make buying a home easier
Life expectancy calculator will allow people to plan ahead but needs to be handled carefully
Do alternative savings offer happy returns?
How to start your own internet business
The housing market is overheating and it's time to cool off
- 1 Chelsea 1 Sunderland 2: Graceless reaction of Jose Mourinho a sad effort to hide his own flaws
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Unbeliebable: The White House offer 'no comment' to anti-Justin Bieber petition
- 4 Loch Ness Monster found on Apple Maps?
- 5 Shropshire criminals ‘using unmanned drones and infrared cameras to find illegal cannabis farms’ – and then steal from the growers
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
Abdullah Deghayes: My son was the martyr of a just cause, says father of British teenager killed in Syria conflict
Ukraine crisis: Helicopter gunships take country closer to all-out war
iJobs Money & Business
Negotiable: Harrington Starr: Database Team Lead ( Leadership, Sybase, Compute...
£40000 - £50000 per annum + Bonus+Benefits+Package: Harrington Starr: C#.NET D...
£25000 - £35000 per annum + Bonus+Benefits+Package: Harrington Starr: VB.NET S...
£45000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Trade Suppor...
Day In a Page
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds