Extracts from the Templeton China August 2009 fund manager commentary.
• Concerns regarding policy tightening in China dragged regional markets down in August, although Chinese Premier Wen Jiabao stated that the government would maintain its current macroeconomic policy to ensure continued growth in the domestic economy.
• We believe the outlook for China remains positive due to its relatively strong fundamental characteristics and faster growth rate compared to its developed and emerging markets counterparts. Indeed, in the face of the global economic slowdown, the Chinese economy continues to record exceptionally robust growth rates. Domestic demand growth remains robust, while the accumulation of foreign exchange reserves also puts China in a much stronger position to weather external shocks.
• However, it is important to realise that volatility is still with us and probably will be for some time. We therefore aim to take advantage of dips in the markets to buy stocks cheaply, paying attention to valuations and long-term earnings growth prospects. In our opinion, current valuations are below their peaks and thus are not excessive.
We continue to believe strongly in the potential for consumer-related industries in China, given the country’s relatively robust economic growth, its strong consumer base, rising per capita income and consumers increasing demand for various goods and services. When we focus on the theme of rising consumption, our emphasis is not only on stocks in the consumer products industry but also on areas such as consumer distribution and consumer banking. Indeed, consumer-related sectors such as financials, consumer discretionary and consumer staples were the strongest contributors to absolute performance for the three months through August.
Concerns regarding policy tightening in China dragged regional markets down in August, with the MSCI Golden Dragon Index which fell by 5.76% in US dollar terms. However, in an attempt to dispel policy tightening fears, Chinese Premier Wen Jiabao stated that the government would maintain its current macroeconomic policy to ensure continued growth in the domestic economy. China’s central bank also announced that monetary policy would remain moderately loose to support growth. Foreign direct investment (FDI) flows into China declined 36% year-over-year to US$5.4 billion in July, bringing the year-to-July total to US$48.4 billion. Fixed asset investment, however, jumped 34% year-over-year in the first half of 2009. Retail sales increased 15% year-over-year in July, largely due to greater demand for automobiles resulting from government initiatives. In an effort to boost trade and economic ties between China and Pakistan, Pakistani President Asif Ali Zardari visited China in August, and the two countries signed eight Memoranda of Understanding (MoU) in areas such as energy, agriculture and healthcare.
Templeton China – Market Commentary
Extracts from the Templeton China August 2009 fund manager commentary.
• Concerns regarding policy tightening in China dragged regional markets down in August, although Chinese Premier Wen Jiabao stated that the government would maintain its current macroeconomic policy to ensure continued growth in the domestic economy.
• We believe the outlook for China remains positive due to its relatively strong fundamental characteristics and faster growth rate compared to its developed and emerging markets counterparts. Indeed, in the face of the global economic slowdown, the Chinese economy continues to record exceptionally robust growth rates. Domestic demand growth remains robust, while the accumulation of foreign exchange reserves also puts China in a much stronger position to weather external shocks.
• However, it is important to realise that volatility is still with us and probably will be for some time. We therefore aim to take advantage of dips in the markets to buy stocks cheaply, paying attention to valuations and long-term earnings growth prospects. In our opinion, current valuations are below their peaks and thus are not excessive.
We continue to believe strongly in the potential for consumer-related industries in China, given the country’s relatively robust economic growth, its strong consumer base, rising per capita income and consumers increasing demand for various goods and services. When we focus on the theme of rising consumption, our emphasis is not only on stocks in the consumer products industry but also on areas such as consumer distribution and consumer banking. Indeed, consumer-related sectors such as financials, consumer discretionary and consumer staples were the strongest contributors to absolute performance for the three months through August.
Concerns regarding policy tightening in China dragged regional markets down in August, with the MSCI Golden Dragon Index which fell by 5.76% in US dollar terms. However, in an attempt to dispel policy tightening fears, Chinese Premier Wen Jiabao stated that the government would maintain its current macroeconomic policy to ensure continued growth in the domestic economy. China’s central bank also announced that monetary policy would remain moderately loose to support growth. Foreign direct investment (FDI) flows into China declined 36% year-over-year to US$5.4 billion in July, bringing the year-to-July total to US$48.4 billion. Fixed asset investment, however, jumped 34% year-over-year in the first half of 2009. Retail sales increased 15% year-over-year in July, largely due to greater demand for automobiles resulting from government initiatives. In an effort to boost trade and economic ties between China and Pakistan, Pakistani President Asif Ali Zardari visited China in August, and the two countries signed eight Memoranda of Understanding (MoU) in areas such as energy, agriculture and healthcare.
via Franklin Templeton Investments – Market Commentary.
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