Fund manager Peter Dalgliesh attributes performance to the region’s domestic demand story, property price inflation and global infrastructure expenditure.
He says: “As the manufacturing backyard of the developed world, Asia will inevitably suffer on the back of a revision in global GDP growth, but the abundance of liquidity in Asian financial markets, especially in China, has insulated the region from many of the problems emanating from the global credit squeeze.”
Dalgliesh adds that China has experienced very strong corporate earnings growth, faster than expected GDP growth and negative real interest rates.
He says: “The country’s banks are well funded and comfortably in excess of the reserve requirement ratio imposed by the People’s Bank of China, and although inflation has spiked up this year on the back of food price inflation, this is a supply driven problem which is unwinding as we speak. With an increase in state supplied crops and animal stocks coming to market this should see inflation roll over by the end of the year.
“We continue to identify strong themes in China where we believe there is further room for multiple uplifts. These include transport and infrastructure, raw materials and the environment. As the hot topic of recent months, the environment is likely to feature high on the government’s agenda when it convenes at its next 5-year congressional meeting this October.
“The problems affecting global credit markets should offer investors greater incentive to allocate capital towards Asia. Assuming central banks re-liquify the world’s banks sufficiently, investment focus is likely to turn towards areas of dynamic growth and that, without a shadow of a doubt, is likely to come from Asia.”