lefigaro.fr / jdf.com – The slowdown in China is it disturbing for the world economy?
Yi Tang – Rather than "slow", I prefer to use the term "consolidation". China has still a yoy growth of 10.3% in the second quarter. The Chinese economy has certainly been a highest of 11.9% in the first quarter of this year and two of the three engines of China's economic growth in infrastructure investment and consumption have in fact seen their share in gross domestic product ( GDP) decline, while exports increased. But this consolidation is a natural and even necessary to avoid overheating. Note that the consolidation levels are higher than last year at the same time.Now, the year 2009 was so exceptional for the Chinese economy as a result of comparison with this year will necessarily be less favorable. We expect GDP% between 9 and 10% in 2010 to China.
What impact is there on the Chinese stock markets?
Paradoxically, since the confirmation of the consolidation of the Chinese economy, Asian stock markets' performance rather positive. However, fears of overheating and "double dip" (recession followed by recovery and then a new relapse) had plagued the financial markets and new opportunities for the long-term investors on the Shanghai and Scholarships Hong Kong. We encourage individuals to return to Chinese equities from one or two months and are positive for twelve or eighteen months.We also note that investors have a vision of increasing long-term actions, while so far the Chinese were accustomed to behave as short-term approach and more sheepish than international investors. He must be aware of that being a portfolio manager is very young in this country: the first asset management companies in China were introduced in 1998.
The change of status of China, which moves from an economy driven by exports to an economy supported by domestic consumption, he will offer new opportunities for investors?
Absolutely. This change is very positive for China and especially since it is now confirmed. The country has long said he would change the economic model without it being proved by the figures. Quite the contrary. The share of domestic consumption in GDP fell between 2001 and 2007.But since 2008, the government has clearly realized its desire to boost domestic demand by increasing spending on health and grants for education or for poorer totally free credit score.
This change will he impact your portfolio allocation?
We will clearly strengthen us in the consumer values. Our specialists will visit various areas of the region and identify trends. We are generally positive on the cyclical sectors in which the valuations are relatively attractive.
We will also strengthen the real estate industry. Three months ago, the government has taken a series of measures in this field. While the sector has seen massive sales, we have to position ourselves.Since April, we recorded an increase of 20% for a pocket which represents only 6% of our portfolio. Finally, we are strengthening in the commodities sector, because we thought that economic activity remains strong in China, and that the sector is oversold.
Conversely, we will reduce the share of defensive stocks such as pharmaceuticals (6.5% to 2%) and telecommunications (15% to 12/13%), for which we won respectively 40% and 50% and between 11% and 20%. We believe, unlike other managers forced to remain invested through management benchmarked, that valuations are too high now. For the first time we have seen in China as heads of companies bought back shares with their own money. This confirms our fundamental belief that companies are good and that the Chinese economy remains in good health.Rather than trying to replicate the performance of an index, we prefer to focus on the fundamentals of companies and their level of recovery.
Agricultural Bank of China could become the biggest IPO. Have you positioned in this title?
We have not invested in Agricultural Bank of China because we believe that the action is too expensive. Moreover, we do not, in general, the market capitalization as a criterion for management. We are lacking in banking stocks for nearly two years, but gradually reinvest in this sector. If the fundamentals of the Chinese economy evolve only very rarely, the value of its businesses varies, it very quickly. We will focus again to the Agricultural Bank of China, where the valuations of financial stocks will be more attractive.