Opalesque Industry Update - Despite recent dips in its economic growth, China has seen a series of positive developments that will lead to increased returns for investors, according to Yang Liu, Chairman and Chief Investment Officer of Atlantis Investment Management (HK) and Fund Adviser to the Atlantis China Fund.
These developments include the decision by the Chinese Central Government to de-peg the renminbi from the US dollar, which has resulted in a re-rating of Chinese assets. Liu believes that the decision – something she had previously predicted – will also lead to multi-year positive returns for the market.
“In the coming months, we believe that investors will move to overweight China in their asset allocations and that the currency movement will provide a new investment horizon in the country,” says Liu.
“While some market participants have been concerned about recent economic data, the beauty is in the detail. Headline GDP growth in Q2 continued to be robust at 10.3% year-on-year and the data we have seen also indicates that the Government’s aggressive tightening policy – in place since March this year – has worked effectively to prevent the economy from overheating.”
Looking at recent economic data, Liu has noticed a disconnect between supply and demand with a marked decline in industrial value-added growth on one hand, and continued robustness in demand indicators such as fixed asset investment, retail sales and exports on the other.
Moving into the second half of 2010, Liu believes that monetary policy may take a more neutral stance and at the very least expects an easing of tightening policy to arrive in the fourth quarter as a catalyst to drive the market to recover from its lows of recent months.
“At that point, liquidity tightness and new loan growth control could also be relaxed,” says Liu. “This will potentially create significant alpha for investors willing to take a position against conventional wisdom.”
About the Atlantis China Fund
The objective of the Fund is to achieve long-term capital appreciation through an actively managed portfolio of equity and equity related investments in The People’s Republic of China.
The Fund focuses on a portfolio of Chinese equities, investing predominantly in B-shares, H-shares, Redchips and P-Chips (listed privately-owned enterprises with a majority share owned by Chinese citizens). The Fund may also invest in A-shares through the use of structured products.
Performance (as at 30.06.2010):
Atlantis China Fund
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