Tue, Nov 09, 2010 - Page 11 News List

Investors have low China exposure

By Crystal Hsu  /  STAFF REPORTER

China will continue to experience high levels of economic growth for years to come, but international investors remain inadequately exposed to the world’s largest economy because of worries over credit-tightening measures, a fund manager from London-based Jupiter Asset Management Ltd said in Taipei yesterday.

China fund specialist Phillip Ehrmann said that although the Chinese economy was expected to grow by 8 or 9 percent this quarter and to expand at a similar pace next year, China’s weighting on MSCI World — a stock market index of 1,500 international stocks — was only 2 percent.

“China’s share of the global economy is expected to double over the next 20 years,” Ehrmann told a media briefing at the headquarters of its local strategic partner, Taishin Financial Holdings Co (台新金控).

Regional and global portfolios are underweight on China because of concerns over its overheating economy and the government’s credit-tightening measures, he said.

Ehrmann, who made a trip to China last month, said targeted credit control was proving successful in helping put the economy back on track to moderate growth after cooling the property and equity markets a bit earlier this year.

China will place more emphasis on the quality of its economic development with a view to bridging imbalances between capital and labor, the rich and the poor, as well as coastal and inland provinces, the fund manager said.

“The era of growth at any price is no longer an option,” he said. “There will be increased focus on sustainability — environmental protection and energy efficiency — as well as on industrial competitiveness and technology.”

Against this backdrop, Ehrmann said Chinese firms that are best positioned to navigate these changes offer the biggest growth potential.

He also expects China to raise key interest rates by another 50 basis points in the coming six to 12 months after a surprise hike of 25 basis points last month.

However, he said the rate change would be aimed more at normalizing monetary policy amid ample liquidity rather than tightening credit to reverse economic conditions.

“While China’s inflation is likely to challenge the 4 percent level because of rising food costs, it will ease toward the year-end and hover around the normal 3 percent range next year,” he said.

Neither the expected CPI reading or rate hikes will upset the Chinese stock market, Ehrmann said.

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