Posted inIndustry views

Is China’s ‘new economy’ a light in the dark?

Asset management firms that have bet on China’s consumer and services industry seem to be on the right track as the central government guides an economic transition.

According to data from FE Analytics, the top five performing Chinese equity funds with an allocation of at least 50% to the consumer sector have strong three-year trailing performance. In fact, out of 195 funds surveyed in the two sectors, more than 65% of the funds have posted positive returns for the period.

The top five performing Chinese equity funds with over 50% allocation in the consumer and service sectors:

The top five funds are overweight on sectors such as consumer durables, consumer discretionary products, media, automobile, financials, insurance and healthcare.

BNP Paribas Investment Partners said that the fund’s overweight in the healthcare and consumer staples sector has contributed to its positive performance. 

Picking services 

Luke Ng, senior vice president of FE Analytics, added that he believes China’s insurance and banking sectors will form the backbone of China’s services industry.

“The outlook for Chinese insurance is positive as the sector is experiencing robust premium and sales growth. Over the long term, the rising middle class in the country should continue to drive demand for this sector,” Ng said.

“For the banking sector, although a slowdown in China’s economic growth could worsen asset quality and increase the number of non-performing loans, the sector is still trading at attractive valuations,” Ng added.

Michael Acton, director of research of AWE Capital Management told Fund Selector Asia that he sees opportunities in the Chinese property sector.

“China is seeing slower growth, but you have strong urbanisation that is driving demand for property in certain regions,” Acton noted.

Part of the Mark Allen Group.