As GDP growth slows, previously tight Chinese companies are starting to pay or increase dividends, according to Lilian Leung, portfolio manager at JP Morgan Asset Management.
The example of Tencent shows that expensive valuation and great performance can co-exist, said Bin Shi, China equities strategies lead portfolio manager at UBS Asset Management.
Concern over credit quality and liquidity as well as transparency issues are barriers to investing in China fixed income and equities, the managers said.
The bank has tactical overweight positions on equities and prefers US equities relative to high-grade bonds.
A-shares have been range bound, but supply-side reform progress and the expected link between the Shenzhen and Hong Kong markets present tactical opportunities, the bank said.
Goldman Sachs AM said it is underweight state-owned enterprises despite planned SOE reforms.
The June 14 decision by the index provider could send fund flows of $25bn into China’s markets, according to Stephen Kam, senior product specialist for Asian equities at HSBC Global Asset Management.
In a contrarian view, Andrew Swan, Blackrock’s head of Asian equities, expects cheaper old economy stocks to benefit from supply-side reforms.
Around $39bn fled funds in Asia during Q1 this year, and one asset class took an enormous hit, according to data from Strategic Insight.
Despite the volatility in Chinese equity markets this year, industry sources say that they still like China – both from a regional and global context.