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Rooster booster for China

The Chinese new year of the rooster has got off to a flying start with Gartmore crowing over long-term prospects for China and Far East emerging markets.

Despite concerns over Sars, government intervention and an overheating economy, China’s GDP grew rapidly at a rate of 9.4 per cent last year.

Figures from the Association of Investment trust Companies show that over three years the average far East investment trust is up by 40 per cent but over the last year the average is just 0.5 per cent.

But an AITC poll of global and UK managers last November shows that 41 per cent still think that the Far East, excluding Japan investment trust sector would be the top-performing sector in 2005.

Gartmore head of pacific and emerging markets Philip Ehrmann says China has undergone significant changes in the last three to six months with the government acting to stop runaway investment, which has been causing shortages of raw materials and inadequate infrastructure. But an upturn in consumption of domestic products has prevented a hard landing, he says.

Hong Kong has only just recovered from the Asia crisis of 1997, says Ehrmann. Property prices recovered by 30 per cent in 2004 after a 60 per cent fall since the crisis. The economy has moved from deflation to 2 per cent inflation, which is expected to drive people into spending.

Taiwan, which makes a huge proportion of the world’s PCs, remains vulnerable to US technology demand, he says. Despite strong profits last year, share prices fell because of anxiety over the dollar. Some analysts feel Taiwan technology companies are now over-discounted because of this, says Ehrmann.

He says: “The nature and quality of China’s growth has changed. This is a unique and specific opportunity for investors, with the growth of a Chinese domestic market and an increase in disposable income.”

Chelsea financial services managing director Darius McDermott says: “It is a volatile market, especially with the risk of government intervention. In the long term, we are recommending China as a good opportunity for investors. There are billions of Chinese and as the society matures, they are all going to want mobile phones and DVD players.”

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