In the past year, viewing the emerging markets as a whole, the 12-month forward earnings estimates have factored in expected turning points in earnings that never occured, he said at a briefing yesterday.
While most of the emerging market earnings increases have been supported by India and some ASEAN nations, “China’s fundamentals are slightly better,” Hall said.
“China’s service sector has been doing well and has remained resilient,” but now even the old economy companies are seeing small improvements.
One example is the cement industry, where overcapacity is being cut and consolidation among the players is occuring.
“For the first time in a long time, we are starting to see the price of cement rise in China. It’s not too meaningful, but heading in the right direction,” he noted.
Andrew Swan, head of Asian equities, said earlier that he has bought selective names in China’s energy and materials sectors.
In fixed income, head of Asian credit Neeraj Seth added that the valuation of China credit looks attractive, but the large supply might suppress the yield.
Thus he takes a neutral stance on China bonds, and take exposure to some quality quasi- sovereigns, technology companies and some real estate companies.
Generally, “we are positive on the onshore market more on the [government and related] bond perspective, supported by more fiscal policies amid slowing economies.”
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The three-year performance of MSCI China index versus MSCI Emerging Markets index, in US dollars. China carries weight in emerging markets, and an upturn in earnings should be good for the asset class, which has long underperformed.
