Chinese equities are now attractively priced following a recent market pull-back, according to Baring Asset Management. Barings said that current valuations give a lower entry point for exposure to the long-term growth story in China and it added that government reforms are boosting China’s journey to become a strong market economy.
Laura Luo, head of Hong Kong China equities at Barings and manager of the Baring Hong Kong China Fund, commented: “The measures to improve the return on capital at state-owned enterprises while opening them up to reform, to support the private sector and to encourage further financial sector liberalisation will, in the long term, have a profound effect on China as it prepares for potential recognition as a market economy by the WTO in 2016. If we include recent measures to improve liquidity in the market, our view is that investment conditions are highly favourable in China.”
In terms of sectors, Barings said it likes technology companies and providers of industrial automation solutions, as they are positioned favourably to capitalise on market reforms by delivering productivity gains to businesses and individuals. Barings is also focused on domestic consumption, with spending on tourism, healthcare and education expected to rise as average incomes increase.