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Opalesque Exclusive: China experts warn on dramatic misallocations, bust risks

Matthias Knab reports “live” from the gaimAsia conference in Hong Kong:

Yang Liu from Atlantis Investment Management which runs a L/S China fund, says in the short- and mid-term, currency gains will enhance capital gains in China. As another driver, indexes like MSCI World or MSCI Asia will have to follow the developments of the real economy in China. Also global sector indices like health care etc. will be adapted by giving Chinese companies a larger proportion; both of these trends will affect Chinese stock prices positively.

Liu said that historically, China was trading at a discount over the last 10 years, which is changing now. This “re-rating story”, earnings growth and momentum “are happening together” for a prolonged period.

Liu predicts China will develop to be a “complete” capitalist system. This development is driven by the young Chinese which are very eager and educated. There would be a clear generation gap between the young generation and the “old guard”, which often have no international experience. A macro risk she is concerned about is government intervention in the economic and financial domains, instead of letting to develop market solutions.

Khiem Do, Head of Asian Multi-Asset, Baring Asset Management says a landmark development for China is of course the recently passed protection of private property. China will continue to enjoy a “......................

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