Talk about a turnaround. China’s economy grew by 13% in 2007, helping to catapult the Gartmore China Opportunities Fund to the top of the performance tables, with a 71% return. But with almost every piece of economic data currently pointing downward, Chinese stocks have plunged, dragging the £400m fund with them. It’s down 37% over one year, against a 32% drop for the MSCI Zhong Hua Index, as factories from Sichaun to Guangdong shut up shop and electricity usage turns negative for the first time ever.
But with stock prices so beaten down, there are some “very attractive valuations over a long-term basis coming out of the woodwork”, says the fund’s manager, Charlie Awdry. A geography graduate from the University of Bristol, Awdry focuses on industry leaders listed in Hong Kong, where valuations are cheaper and investors are afforded better protection. Concentrating on those firms that can weather near-term difficulties and generate a lot of cash, his biggest holding is China Mobile, the dominant mobile-phone operator in the region. It generates a huge amount of cash flow, which supports the stock price and dividend.
He also likes Guangdong Investment, a water supply company that recently renegotiated a contract with Hong Kong “at very attractive rates”; and consumer staples producers such as Hengan International, the leading manufacturer of tissues and nappies in China. “People are buying more of their products as their standard of living increases”, he says, “while the paper pulp and other raw materials they use are falling in price. It looks pretty attractive right now.”
Contact: 0800-289336.
| Gartmore China Opportunities Fund top ten holdings | |
|---|---|
| Name of holding | % of assets |
| China Mobile Ltd | 8.8 |
| Industrial & Commercial BK China (ASIA) | 6.1 |
| China Construction Bank | 4.4 |
| Petrochina Co | 4.2 |
| Hong Kong Electric Holdings | 4.1 |
| China Life Insurance | 3.9 |
| CNOOC | 3.9 |
| China Telecom Corp | 3.7 |
| China Petroleum & Chemical Corp | 3.5 |
| Cheung Kong Holdings | 3.5 |