Fund of the week: A safer way to get a slice of China

By Emma Thelwell Mar 06, 2006

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Many people think that the riskiest investments in China are the heavily government-owned companies, Flavia Cheong, manager of the Aberdeen International China Opportunities fund, told Ellen Kelleher in the FT.

But they are wrong. It is actually the private firms you really need to worry about. Indeed, while transparency has definitely improved for mainland Chinese companies listed on exchanges outside the country, those listed only within China are not always promoted or run by particularly professional managers. Cheong’s response is only to invest in mainland firms listed in Hong Kong.

Still, this doesn’t seem to be holding performance back. Since its launch in 1994, the fund has soared 222.57%, while its benchmarket index has risen only 122.09%. Cheong is “optimistic” on the macro level, she told Kelleher, believing that China is more committed to reform and regulation than most other emerging markets.

However, her main focus as an investor is bottom-up stockpicking with a constant quest for quality. With this in mind, she is wary of  the steel and auto sectors, finding it “hard to fathom why margins are so weak”, given the Chinese economy is growing at a rate of 9%-10%.

But she is very keen on shares in Jardine Strategic, the holding firm that controls Jardine Matheson, Dairy Farm, Mandarin Oriental and Hongkong Land. It might be a “really boring pick”, but at the moment the group has more than 700 franchises in China and its shares look “pretty cheap”.

Contact: 01224-631999, www.aberdeen-asset.com

Aberdeen China Opportunities top ten holdings

Name of holding                             % of assets

Swire Pacific B                                   7.5%
China Mobile                                      6.1%
Petrochina                                        6.0%
Jardine Strategic Holdings                    4.5%
Wing Hang Bank                                 4.4%
Hong Kong & Shanghai Hotel                 4.1%
ASM Pacific Technologies                     4.0%
Sun Hung Kai Properties                       4.0%
Beijing Capital International Airport         3.7%
Dah Sing Financial                               3.6%

Published in Investments | More articles by Emma Thelwell

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