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Chinese consumption trends still strong

Monday 22nd February 2010
By Mike Jones

After a difficult start to the year caused by a moderate rise in the reserve requirement ratio for banks, China’s stock market has rallied during the first of half of February.

Charlie Awdry, manager of Gartmore’s £712million China Opportunities Fund said: "The economic data has been strong and the consumer is still spending."

Awdry's enthusiasm for Chinese consumer trends is reflected in his long-standing holdings.

"The core of the Fund continues to be consumer related. Some of my positions are in beneficiaries of China’s rapid growth in Internet usage such as Baidu; the take-up of more varied food products by consumers such as China Mengniu Dairy; and local brands like Li Ning."

Awdry has also increased the Fund’s exposure to exporters, buying shares in companies such as the "Made in China" giant Li & Fung. Last month, Li & Fung won new orders from Wal-Mart worth an estimated US $2billion in the first year.

Despite such positive signs, Chinese equities traded in Hong Kong remain inexpensive.

"The Hang Seng China Enterprises Index trades on less than 12 times this year’s earnings, which is undemanding by historical measures or compared to other major world markets," Awdry said.

"We certainly see many areas of value and scope for unexpected earnings growth that support the case for investing in attractive Chinese businesses over the next 12 months."

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