There are still plenty of high-quality companies worth invest in China despite the country’s slowing economy and the US-China trade war, according to Guinness Asset Management.
The firm’s co-manager for its Asian equity income fund, Edmund Harriss, said the best opportunities remained in China, Hong Kong and Taiwan, compared to the rest of Asia.
“China has been transformed in terms of its manufacturing capabilities, from producing basic and non-complex products like textiles, to far more sophisticated products,” he said.
“Indeed, computers are now China’s biggest export and it also produces many other consumer electronics such as smart phones as well as complex industrial machinery.”
Harriss noted that the country was also building strong capabilities in automobile manufacture.
“Whist the trade war has caused some short-term disruption for China in terms of uncertainty, in the long run, we believe China’s continued growth will prevail,” he said.
In the immediate term, the fund manager said the country now had orthodox economic responses to currency weakness, bad debt, and overall deceleration of economic growth, and not by “a politically-driven release of extra liquidity”.
“This Asian wealth is underpinned by long‐term industrial policies that have made the region a manufacturing hub in global production,” he said.
“The upgrading of skills, capacity and efficiency have brought with them higher wages and rising investment into long‐term productive assets.
“Corporate China now focuses relentlessly on the quality and utility investment to deliver long‐term growth over the next 20 to 50 years.”
Harriss noted the poor sentiment for Asian markets created an undervaluation of the long-term operational superiority of businesses that would be delivered in the form of profits and dividends over the next three, five, 10 years, and beyond.