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India’s equities have reached such high levels that China looks relatively attractive, said Aberdeen’s Xin-Yao Ng, a Singapore-based investment manager of Asian equities. “Just take a fundamental approach, there’s a lot of value in China,” he said in an interview on Friday. “But we don’t know how long we have to wait.” Until the Chinese economy improves, his strategy is to stock pick. Official figures show that China’s growth rate has slowed compared to previous decades. Chinese stocks have fallen over the past several months, with the Shanghai Composite trading at its lowest level since the early months of the pandemic in 2020. All this follows a year in which growing concerns about China’s economy and a lack of stimulus have kept investors on edge. shore. Eberden’s Ng remains cautious on China and says the most important indicator is the property sector – particularly transaction volumes and prices. “Once that stabilizes, consumers can be more confident, families can be more secure about their financial situation,” he said. But it is not clear when this will happen. Ng does not expect significant stimulus from the government in the coming months. Chinese Prime Minister Li Qiang signaled a restrained stance last week when he told a global audience in Davos that China “will not resort to massive stimulus” and “will not seek short-term growth while accumulating long-term risks.” ” What to buy Meanwhile, Ng said he is focusing on Chinese stocks with high free cash flow yields – a measure of potential returns – particularly some internet names that have announced share buybacks. “In China, there are a lot of stocks that are giving you plus-10% free cash flow yields,” he said, adding that the yield for stocks in India is only 1% to 2%. However, Aberdeen is overweight India and overall is underweight China, Ng said. He said the company is selectively moving some money from India to invest in China and some thematic dramas following its high performance. Aberdon’s funds include the China A Share Sustainable Equity Fund, which had $2.4 billion at the end of November. Its top 10 holdings include Kweicho Moutai, Air Eye Hospital and Mindray. “We are selectively including things like sportswear,” Ng said. How outdoor activities have become more popular in China is helping brands like Nike and those owned by Chinese company Anta. Another area of selective buying is healthcare stocks, he said. He said the company expects companies like Mindray to emerge “much stronger” from China’s anti-corruption campaign in the region – while also offering a hedge against growing export business. Ng said one category Eberden has begun to focus more on is some export-oriented names, given expectations the U.S. economy will soften and generate stronger-than-expected demand for Chinese goods. “We’ve started to hear some [industrial] Names have started talking about return of orders, there may be some positive signs,” he said. China’s exports grew faster than expected in December, but not enough to offset the year’s decline, the first annual decline since 2016. Nomura’s proprietary leading index Asian exports released on Friday suggested Asian exports could rise in February. The index has reached its highest level in four consecutive months since May 2022. But overall, many concerns remain for China’s economy, from geopolitics to population growth. Investors and companies would like a bigger stimulus, a bigger economic support, but the government doesn’t think the economy needs that,” Ng said, noting that “in a recession, you really need to break it down.” “Too much slack has to be given to the spiral in confidence.”
