Industry sources noted that although the Chinese economy is slowing, the central government remains hard at work continuing down the path of fiscal and monetary reforms.
Oversea-Chinese Banking Corporation (OCBC) said last week that China’s move towards launching a trial of the QDII2 program demonstrates that the country’s capital account liberalisation is on track. Under the program, high net worth individuals can choose to invest up to half the total value of their assets in international financial assets – a significant improvement from the previous program, which limited individual investments to $50,000 per annum.
Aberdeen Asset Management’s views are aligned with OCBC’s. The fund house said that recent events could pave the way for the yuan to become an international funding currency, which in turn may underpin China’s bid for the yuan’s inclusion into the SDR basket – supplementary foreign exchange reserve assets defined and maintained by the IMF.
“The decision [which the central government] has taken is the desire to become a component of the SDR rather than just being macro-economically focused,” Mike Turner, Aberdeen AM’s head of multi-asset desk told Fund Selector Asia.
“China’s stock markets seldom reflect the true nature of its economy, while the Fed’s impending move should already be priced in. If the recent correction means a quicker return to fundamentals, there will be opportunities for us to add stocks that have sold off indiscriminately and pick high-quality ones that trade at attractive valuations,” Aberdeen said in a recent research note.
"Tthere will be opportunities for us to add stocks that have sold off indiscriminately and pick high-quality ones that trade at attractive valuations."
Aberdeen AM noted that consumables catering to China’s middle-class and the recovering housing market could be good entry points for long-term investors.
Newton Investment Management noted this week that while it believes Chinese banks and property companies will continue to struggle with profit growth, the fund house is not prepared to exit China.
It disclosed that it has chosen to retain exposure in the Chinese financial sector through wealth management companies, insurance companies and selected REITs.