JP Morgan Asset Management (JPMAM) remains convinced that China's consumption trends will continue to support its long-term investment case, with its Hong Kong portfolio continuously tilted in favour of the Mainland Chinese markets.
Speaking at JPMAM's press conference, Emerson Yip, an Investment Manager of JP Morgan Funds (JF) Hong Kong Fund and JF Greater China Fund, commented, "We remain optimistic about the longer-term prospects for China's restructuring and economic growth. Although recent economic data confirmed that China was unable to escape the fallout from the financial turmoil and global recession, we are still looking at around 7 percent GDP growth for 2008, working on the assumption that the policy stimulus will work and generate the expected multiplier effects. Chinese policymakers have been waging an all-out campaign to revive economic activity. We, therefore, expect to see sequential improvement in the second half of 2009."
Given the de-leveraging impact on local corporate and marginal households in Hong Kong, JPMAM will adopt a dual strategy of increased emphasis on defensive and value names, coupled with China exposure at an attractive price.
"For now, our Hong Kong and China portfolios stay defensively positioned and maintain a tactical cash position for ready deployment. We continue to retain a preference for companies with solid balance sheets, earnings visibility and strong cash flows," Yip explained.
While JPMAM expects to see more downgrades to corporate earnings estimates of its MSCI China valuation, it pointed out that majority of downgrades has been completed.
"Additionally, if history is any guide, equity markets generally bottom out some months in advance of the earnings and economic cycles. Therefore, we believe value has emerged in certain sectors/stocks, offering a good buying opportunity to investors with a 12-month or longer time horizon," said a JPMAM statement.
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