China is seeing a recovery in domestic dmenad nad could well see a sustained recovery in 2010, according to Allianz RCM's Christina Chung.
Yesterday we reported on the emerging market equity managers who are currently underweight China but Chung, who runs the Allianz RCM China fund as well as the group's Hong Kong fund, is confident the outlook for the country is bright.
'We have seen recovery in consumption as indicated by the performance of various retail companies and consumer brands,' she says. She highlights weakness in retail sales for wine, apparel and footwear duringt he first quarter of 2009, but points to a general pickup in sales since April this year.
'The property market in China has also seen a significant turnaround with certain listed property companies achieving strong sales in the first five months of this year,' Chung says. 'There has also been some price recovery and inventories of properties have reduced substantially. In certain cities like Shanghai there is now even a shortage of supply.'
'Underlying domestic demand is strong in China,' Chung points out. 'The level of household debt level is low and the household savings rate is high, whilst income is slowly rising. Property and stock market gains have contributed to the recovery in domestic consumption in China and the sharp recovery in the property sector is beyond even the expectations of Chinese developers themselves.'
Over the three years to the end of June, Chung's Allianz RCM China fund has beaten both the index and the sector average. The fund has returned 70% in dollar terms, while the MSCI China benchmark has risen 66% and the average fund in the sector has returned 64%.