Offshore Capitalist

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.

Related posts:

  1. Strong China trade figures point to recovery
  2. Monthly Oil Market Report (October 09) – OPEC
  3. China Should End Monetary Stimulus, Aberdeen Says
  4. Why China must do more to rebalance its economy
  5. Rathbones Economic and Market review – Julian Chillingworth
  6. Beware the China bull – there’s still a long march ahead
  7. Emerging-Market Rally to Extend to 2010
  8. Russian economy to grow faster than projected in 2010 – ministry
  9. China Gold Consumption
  10. Ian Henderson on China driving commodity prices
  11. World Economy Continues to Defy the Pessimists
  12. IMF chief keeps up pressure on China to let yuan rise
  13. China rounds on U.S. rates as global economic risk
  14. A risky time to dabble in China
  15. China currency move a matter for medium-term – IMF
  • Welcome to Offshore Capitalist

    Do dramatic financial headlines every day drive you crazy? Forget them! Drop by Offshore Capitalist every now and then to catch the useful stuff.