FUNDS EASING BACK INTO CHINA

       Fund managers recommend investors to gradually invest in China's stock market after its key index has fallen more than 20 per cent since August.
       A fund manager from TMB Asset Management who asked not to be named said the movement of the Shanghai Composite Index, which is widely used by fund managers as a benchmark in China's equity market, has been very volatile over the past few months. The market return has fallen more than 20 per cent from the yeartodate return of 87 per cent earlier to 68 per cent as of yesterday.
       "China's stock market is in its correction period after it surged hugely during the first seven months of the year. That made its stock prices stay above the fundamental level. There was profittaking for all of August," he said.
       He added that TMB Asset Management has recommended its customers to gradually sell shares in China as the market has rallied significantly.
       However, the recent correction was partly due to capital outflow into the US stock market as investors believe all the negative news has already been absorbed, while US stocks are not so expensive.
       But after the US stocks rallied and started to be too expensive, capital flows would start to go back to China again. China's GDP growth this year is expected to be around 8 per cent, while some economists forecast the Mainland GDP growth will reach 10 per cent or double digits next year.
       A senior government researcher was quoted by Bloomberg as saying that China's economic growth may quicken to 10 per cent or more in the fourth quarter because of stimulus spending and a recovery in exports, said Chen Dongqi.
       "Economic growth may accelerate from the third quarter until the first quarter," Chen, a researcher at the country's top planning agency, the National Development and Reform Commission, said at a conference in Shanghai yesterday. He sees "doubledigit growth because of the stimulus plan, recovering exports and domestic consumption."
       The world's thirdbiggest economy will expand 9.9 percent in the fourth quarter from a year earlier and 10 percent in the first three months of 2010 as the recovery strengthens, according to a Bloomberg News survey of economists last month. Premier Wen Jiabao said last Friday that China "cannot and will not" pull back from stimulus measures.
       The fund manager also added that investors should start gradually investing in the China market to diversify investment risk. After the correction, there will be a chance to generate return.
       Another fund manager, from Primavest Asset Management, said the correction in the China market was a good opportunity to invest, but investors are strongly recommended to diversify their investments rather than putting all their money into China. The mainland, he said, still needs economic drive from the world economy.
       In addition, there is also risk that China's performance could affect the market
       The investment should also be gradual. In a 100 per-cent investment portfolio, 5-10 per cent should be allocated to China. As of July, most funds investing in China generated satisfactory returns. The return of the TMB China Equity Index Fund was at 85.08 per cent, while Tisco China India Dividend Fund generated 56.49 per cent. Tisco China India Retirement Fund got 52.32 per cent, while UOB Smart Greater China recorded 43.11 per cent of return. Manulife Strength-Emering Eastern Europe FIF got 43.25 per cent of return. Also as of July, funds that invest in Asia focusing in China also record good return.
       PrimaVest-AllianzGI BRIC Stars recorded 58.79 per cent of return, while MFC Invest Asian Equity recorded 58.22 per cent. SCB Asian Emerging Markets Open End could generate 62.12 per cent, while ING Thai BRIC 40 Fund got 39.04 per cent of return, while Asset Plus BRIC got 39.84 per cent. Aberdeen Asia Pacific Equity recorded 43.19 per cent of return, ING Thai All Asia Equity Fund got 13.36 per cent of return.