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.
- 1 Eurovision 2015: Graham Norton returns with another cutting commentary - his best lines
- 2 Purity balls: Girls in the US making virginity pledges as fathers vow to 'protect purity'
- 3 Eurovision 2015 winner: Sweden beats Russia and Italy to take title from Conchita Wurst
- 4 Mother 'will allow son's circumcision in return for release from prison'
- 5 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
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.
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.
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.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
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.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
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, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
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.
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 four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
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.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
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.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
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.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
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
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof