Investors must be careful about whether China can continue to rein in inflation while maintaining growth, with any slowdown in China likely to hit the domestic share market even harder, according to Prime Value chief investment officer Leanne Pan.
“Our view is that when China’s growth increases we tend to benefit more than China itself, but when China slows we will slow more than the Chinese,” Pan said.
Australia will continue to be strongly influenced by China over the coming financial year, according to Pan.
The continuing shift towards developing markets will continue over the long term as well, she said.
Resources and mining related stocks will continue to perform strongly despite short-term reverses, Pan added.
Local shares were trading at reasonable valuations, but their benefit depended on possible earning downgrades as well as global markets.
The effect that Europe would have on the sharemarket will be difficult to gauge, Pan said.
“The market often anticipates problems and can overshoot both on the upside and downside,” she warned.
