China has a stated target of 7% annual GDP growth and the fact that it has reported itself to be hitting exactly that has been greeted with scepticism.
Among those who are unconvinced is Aviva Investors head of emerging market & Asia Pacific equities Will Ballard, with his firm staying underweight.
“Despite a stronger than expected underlying economy and the recent correction in the domestic equity market, we retain a substantial, long standing underweight position in China,” Ballard said. “As long term investors, we can see the potential China has to offer. However we are mindful of the disconnect between what remain bubble-like valuations of some of the domestic equities and the more attractive valuations found in Chinese companies listed in Hong Kong or offshore.”
Trevor Greetham, head of multi asset at Royal London Asset Managment, says the sluggish growth in China is not necessarily bad for markets generally however.
“This is the slowest pace of GDP growth in six years, but from a global stock market point of view China’s slowdown is good news just as Japan’s weakness was good news in the 1990s,” he said. “A steady drop in Chinese demand will see commodity prices drop, keeping inflation low and monetary policy loose elsewhere in the world.”
