UK funds in­vest­ing in China do best

China Daily (Hong Kong) - - FRONT PAGE - By CECILY LIU in Lon­don cecily.liu@mail.chi­nadai­lyuk.com

United King­dom-reg­is­tered funds in­vest­ing in China de­liv­ered the best re­turns to British in­vestors in the first half of 2017, ac­cord­ing to data re­leased on Thurs­day by in­vest­ment re­search com­pany Morn­ingstar.

The data showed that funds in­vested in China re­turned nearly 19 per­cent on av­er­age to in­vestors over the six months end­ing on June 30. The China re­turns were fol­lowed by funds in­vest­ing in the Asia-Pa­cific re­gion, which re­turned 15 per­cent, and funds buy­ing small cap­i­tal­iza­tion com­pa­nies in Europe and the UK, which also re­turned 15 per­cent.

An­a­lysts said strong Chi­nese eco­nomic growth rel­a­tive to stock mar­ket val­ues is a key rea­son for the good re­turns seen by UK funds.

Danny Dolan, manag­ing direc­tor of China Post Global, the in­ter­na­tional arm of the Chi­nese fund China Post, said, “The Chi­nese eq­uity mar­ket trades at a dis­count based on the coun­try’s GDP growth, and is quite in­ex­pen­sive rel­a­tive to the US and sev­eral other de­vel­oped and emerg­ing mar­kets.”

Mean­while, sig­nif­i­cant cap­i­tal ac­count lib­er­al­iza­tion mea­sures by the Chi­nese gov­ern­ment over the past year, which al­lowed for­eign in­vestors greater ac­cess to the Chi­nese on­shore stock and bond mar­kets, also made it pos­si­ble for many more over­seas funds to buy into China.

Th­ese mea­sures in­clude stock and bond mar­ket con­nects, which al­low over­seas in­vestors to buy Chi­nese shares via Hong Kong, and rel­a­tively re­laxed rules for for­eign in­vestors’ ac­cess to China’s in­ter­bank bond mar­ket.

“Steady work done by China to ease ac­cess to its mar­kets for for­eign in­vestors is so crit­i­cal,” said Jan Dehn, head of re­search at the Lon­don-based in­vest­ment man­age­ment com­pany Ash­more.

More for­eign in­vest­ment in Chi­nese stocks is ex­pected, and “first movers will ben­e­fit from hav­ing ex­po­sure (to Chi­nese shares)”, Dehn added.

China’s SSE Com­pos­ite In­dex has in­creased from in­dex value of 3,135.92 at the be­gin­ning of the year to 3,262.08 on Fri­day.

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