Agnes Deng, head of Hong Kong China equities at Barings believed Chinese growth will continue to be strong, with the International Monetary Fund predicting Chinese economic growth of 9.6% in 2011, followed by 9.5% in 2012, significantly ahead of the growth offered by other major economies.
“As inflationary pressures gradually ease and markets become less fixated with policy moves, we believe that earnings growth will once again become the principal driver of Chinese equities over the coming months,” said Deng, who manages the $4.4bn Baring Hong Kong China Fund.
“In this environment, we expect our commitment to companies with good growth prospects and strong balance sheets to reward investors over time.”
She said if inflation peaks over the second half of the year, Barings would look to reduce its position in rate-sensitive markets such as banks and property, sectors where it said performance had been constrained over the past year by the direction of monetary policy.
“While policy risk remains a factor in China, we believe this also presents opportunities for long-term investors, as valuations are attractive both in absolute terms and, in our view, relative to other markets,” said Deng.
“We continue to favour secular growth themes, particularly in the consumer and industrials sectors, and the key holdings in our portfolio are those which we think are likely to be less affected by rising inflationary pressures and policy measures.”
