Daily Management Review

Fidelity Intl Believes Chinese Stocks Now Are 'Very, Very Attractive'


Fidelity Intl Believes Chinese Stocks Now Are 'Very, Very Attractive'
Global investment house Fidelity International has predicted that one of the best places to invest in Asia in due is China and its valuation as described as "very, very attractive" despite an apparent slowdown in the economy of the country.
Chinese economy, the largest in Asia and the second largest in the world has been throwing up a number of sings signals of a potential slowdown during the second half of the last year. Chinese stocks had fallen by more than 24 per cent in 2018 which is the worst performance of those markets in a decade primarily because the China got entangled in a trade war with the United States under which both the countries imposed additional tariffs on each others’ goods worth billions of dollars.
According to Medha Samant, investment director for Asian equities at Fidelity International, responding to a question about the safest place to put money in, said: "It's really north Asia, it's being led by China, we think." She said in a television interview that valuations of Chinese stock are looking "very, very attractive right now."
"What matters to us as active investors is ... what's happening on the ground in China," she said. Further, the attractiveness of Chinese stocks has increased also because of the measures that have been taken by Chinese authorities to give some support to the slowing down economy in recent months. Tax cuts and bringing down the amount that banks are mandated to hold as reserves are some of those measures.
In addition to the consumer and healthcare sectors, the stocks in the new economy are also attractive, Samant said. The attractive stocks according to her also include "very select old economy assets" because of the current value and their potential for yield.
She added that even though "the outlook is definitely more positive," yet there are some headwinds that are being faced by the Chinese economy, she said. She therefore added that there has to be some careful selection by investors.
"There are these other headwinds which are impacting sentiment, which means that there could very well be stocks pulling back ... in certain areas of the market," she said. "Is it time to go in and be a big buyer? Well, you got to be selective, it comes back to that. Look for areas that still make sense fundamentally and (where) valuation has come down."
There are apprehensions that the Chinese economy would slow down more than is being expected because of the dragging on of the trade war with the US. Frederic Neumann, co-head of Asian economics research at HSBC, said the official target for the growth of the Chinese economy in 2018 was 6.5 per cent while most economists are of the opinion that the economy progressed at about 6 per cent last year.
According to Neumann, more support from authorities is needed by the Chinese economy, but the "rumored" official growth target range of 6 to 6.5 percent is "still a fairly decent outcome."
"The problem at the moment is the market is worried about a weaker outcome than that. China has to signal clearly that they've put a floor on the growth. Once they do that, I think we all can breathe a little bit easier," he said.