Stock up on China
Prescient Investment Management is in the process of setting up a rand-denominated feeder fund for its Ireland-registered China Fund to give South African retail investors the chance to access the stock market of the world’s second biggest economy.
Although China’s stock market has performed poorly in the last five years Prescient Investment Management Portfolio Manager, Liang Du, says Chinese equities are probably among the cheapest in the world, meaning now could be an opportune time to invest. The Shanghai Stock Exchange Composite Index has slumped 32% in the last five years, valuing it at about 9.5 times projected 12-month year earnings compared to a seven-year average of 15.8 according to data supplied by Bloomberg.
“The Chinese stock market has been doing horribly for the last five years and is basically the world’s worst performer since 2007,” Du told Finweek in an interview. “However, that’s helped make it one of the cheapest stock markets in the world right now, which is exactly why we like it.”
Prescient has just been granted Financial Services Board approval for the China feeder fund and Du says the asset manager expects to have it up and running by the middle of April. South African investors will be able to access the fund through either a lump sum in rand equivalent to the minimum once-off investment of $1 000 required by the dollar-denominated Ireland-based fund. Alternatively investors can make a monthly investment into the fund for an amount equal to $500. Should an investor’s monthly contribution fall short of the minimum monthly instalment amount of $500, the feeder fund will simply wait until the rand-denominated deposits reach the $500 mark before purchasing units in the parent fund.
Retail investors wanting to access the Chinese stock market via the feeder fund will need to hurry however as Du says institutional investors have already snapped up the lion’s share of Prescient’s $50m quota granted by the China Securities Regulatory Commission. Prescient is in talks with Chinese authorities to get additional investment quotas, which could see the fund expanding in size over time.
The benefits of investing in China are obvious. Not only is China the world’s most populous nation with 1.35bn people, it is also the fastest growing of the world’s ten largest economies. Although China’s economy expanded at just 7.8% last year, the slowest in 13 years, its growth is still far outpacing the likes of the US and the recession-hit eurozone.
The OECD said on 22 March that China’s economy was likely to grow by 8.5% in 2013 and 9.9% in 2014.