We may not see the benefits of these Covid regulations until the spring – and China will not be on a steady footing until the Covid situation stabilises.
No one also knows just how deep the property recession actually is – but the attempts to tackle these challenges are a promising start.
I would be cautious over the short term, particularly now the patience of the Chinese people has reached breaking point.
But you can not ignore valuations – and for long-term investors there must be plenty of opportunities in the Chinese economy.
Here are a few choices for investors to consider.
The stalwart
The FSSA Greater China Growth fund is a good starting point, having consistently performed over a long period.
The fund focuses on individual company research, with manager Martin Lau investing in quality companies with barriers to entry, pricing power and sustainable growth.
Governance is a very important element of the fund, although Lau does look at state-owned enterprises where this is improving. The fund also has a strict valuation discipline.
Double whammy investment trust opportunity
Managed by Dale Nicholls, the Fidelity China Special Situations trust invests predominantly in companies listed both domestically in China and on the Hong Kong Stock Exchange.
The trust has a bias towards mid and small-sized companies. In addition to cheap valuations, the fact this trust is operating at a 10 per cent discount makes it an extremely attractive proposition.
A-shares opportunity
Investors also have growing access to the China A-Share market, which offers genuine diversification at a time when asset returns are becoming increasingly correlated.
Those looking for access to the A-Share market may want to consider the Allianz China A-Shares fund, managed by Anthony Wong and Kevin You.
The fund aims to return 3-5 per cent a year over the index, over a market cycle and gross of fees by investing in some 50-70, predominantly large, Chinese companies.
The Asia Pac option
Those looking for exposure to China, but not through a country-centric vehicle, may like the Matthews Pacific Tiger fund.
The flagship product from Matthews Asia is run by a dedicated team in San Francisco, that targets high-quality companies for the longer term. The fund currently has more than 40 per cent invested in China.
Darius McDermott is managing director at Chelsea Financial Services and FundCalibre
