China still presents a compelling investment story despite decreasing interest from some investors, according to Fidelity Worldwide Investment.
Equity valuations are still attractive in Asia overall with cheap price-to-earnings ratios, and although it could be argued the same was true of Europe, the dividend returns were more attractive in Asia than in the developed world, Fidelity Investment Management (Hong Kong) investment director Catherine Yeung said.
Although earnings guidance had pretty much stabilised, there was still expected earnings growth in China of around 12 to 15 per cent, which was still very attractive, she added.
Yeung said that although many retail investors remained cautious on Asia, a lot of the institutional mandates, for example in Latin America and Europe, had already gone back into Asian equities.
Investors also tend to underestimate the policy flexibility available to the Chinese Government, which extends far beyond adjusting interest rates, according to Yeung.
Earlier this year, for example, the Government issued a list of 400 models of car available to the people who procure cars on behalf of government officials – and all 400 models were Chinese.
"So they can just use all these different levers without touching interest rates," she said.
"People really have underestimated some of the policy flexibility they have," she said.
It was still important to be diversified across Asia, Yeung said, because there were many interesting opportunities in places such as Thailand – although it was expensive right now – as well as Korea.
Although it was not a risk-free asset, "if you could say you could only put your money in one Asian market this year, and I know it hasn't worked yet, I would still say China," Yeung said.
