Riding on the dragon

Pru Asset launches China equity fund, says property sector there not a bubble

Some market experts expect equity funds targeting China to enjoy yearly double-digit returns for the next five years.

Four China-focused equity funds in Singapore recorded returns of up to 7 per cent in the three months to mid-August. And Prudential Asset Management is hoping to get in on the act with a new China equity fund here, saying that the Chinese property sector is worth a closer look.

The fund manager launched its China Equity Fund in Singapore on Friday. The Pru China Equity Fund is organised as a feeder fund which feeds into the Luxembourg-domiciled International Opportunities Funds – China Equity. It currently has a fund size of some US$454 million ($603 million).

China’s growth prospects have remained bright despite jitters over a potential double-dip recession in the United States. Last month, the International Monetary Fund lifted China’s economic growth forecast by half a percentage point to 10.5 per cent for this year.

But as the Chinese government starts to wind down its stimulus measures, growth has begun to slow. China’s economy expanded by 10.3 per cent year-on-year in the April-June period, down from an 11.9 per cent surge in the first quarter.

Analysts said this could be a potential risk for China-specific equity funds. Mr Victor Wong, director of wealth management at Financial Alliance, said: “One of the concerns that people have is that policy might be too restrictive going forward … Inflation is also one of the fears because there’s genuine concern of an asset bubble in the property sector.”

Official figures from China’s National Bureau of Statistics showed that property prices in 70 major Chinese cities rose 10.3 per cent year-on-year last month.

But, taking a contrarian view, Prudential Asset Management says China’s real estate sector is not a bubble and, instead, has potential.

Prudential Asset Management investment director Frank Shi said: “Around two-thirds or at least over 50 per cent of the money going into property market, come out of people’s pocket. So, people really have the money. China has that kind of wealth, the high property price is supported by wealth.”

Source : Today – 14 Aug 2010

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