Long-term China bear Robin Parbrook is starting to warm to the country but says there is still a long way to go on the country's path to reform.
For example, Schroders’ Asia veteran said he is still relatively unimpressed by China’s recently announced Free Trade Zones as he is not interested in the banks and financial services companies they are likely to attract.
But with the FTZ initiative just part of a raft of changes announced to move the country towards an open market economy, Parbrook is more encouraged by measures to relax labour laws and currency moves, as well as the anti-corruption drive.
In his portfolios, the Citywire A-rated Parbrook continues to shun state-owned banks and financials in general, and thinks the best Chinese opportunities over the coming months will come from industrials and tech firms.
As a value-biased investor, he is also more optimistic after the sustained sell-off of the mainland Chinese equity market.
He says attempts by the government to deflate the credit bubble will inevitably lead to more bankruptcies, but added: 'that is part and parcel of the transition process of reform and we see it as a good thing.'
'We are not suddenly bullish on China but we are more upbeat than six months ago because of the market sell-off and the new government. If it keeps selling off on further slowdown and fears over further bankruptcies, we will add.'
Parbrook said he is starting to spy selective opportunities in pharma, healthcare and tech in the country. However he continues to shun the wave of new environmental companies springing up to tackle China's ever growing environmental issues.
He describes the reforms announced around the new Free Trade Zones as 'completely uninteresting to us' primarily as he does not invest in banks or financial services.
'The new government does seem serious about its broad-based anti-corruption measures and the two way trade on the renminbi is definitely the way to go. We also like the longer term measures to improve education and reform labour laws to allow long term workers to get residency permits in the cities.
'We are not a big fan of the green areas as we think China like everywhere else will not want to pay the premiums for the technology.'
'We don't like Chinese utilities because we don't trust the regulatory framework to be stable. Toll roads have struggled and we don't expect green energy and gas to be any different. Of course we hope such companies will be successful for the sake of the environment.'
The Schroder ISF Asian Total Return fund returned 23.93% over the three years to the end of March 2014. This compares to a loss of 7.5% by the average manager in the Citywire Alternative Ucits EM Equity Including Asia sector over the same period.