AAA  Aug. 29, 2014
Fund Screener: Playing China
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Chinese stocks have been some of the world's best this summer, and investors are once again flocking to the world’s second-biggest economy.

Improvements in manufacturing and other areas of China’s economy have tamped down worries about its slowing growth, at least for now. Economists credit “mini-stimulus” measures by the government for the recent gains, but they’re still split on whether the improvements will be only fleeting or more permanent.

Mutual fund managers say they’re still finding opportunities in Chinese stocks, even though the summer rebound means they’re no longer as cheap as they were. Many managers are focusing in particular on companies that sell to China’s rising middle class. These stocks carry higher price-earnings multiples than big Chinese banks and resource companies, but managers say they’re worth it because of their stronger growth prospects.

Still, those same managers caution that the historical volatility of Chinese stocks means interested investors need to be committed for the long term. It will take a long time for the Chinese government to fulfill its goal of shifting the economy toward more consumer spending and away from trade and investment. It’s a transformation that China hopes will result in a more sustainable rate of growth.

“I still think it’s a place to look forward to for the next 10, 20 years to see growth in earnings, valuations and corporate-governance improvements,” says Robert Horrocks, chief investment officer of Matthews Asia. “It’s too big to ignore.”

Associated Press
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