Excel Funds Management Inc.

Emerging Markets

China remains as one of the most robust economies in the developing world.

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China remains as one of the most robust economies in the developing world.

 

Unlike many other parts of the world, China has a full arsenal of monetary, fiscal and administrative tools that can be used to stimulate its economy when it decides stimulus is needed.  It is for this reason that investors can remain bullish in China as the government has the ability to support a cyclical upturn with policy changes.  In July, China’s CPI raised at its slowest pace in 30 months which offered even more room for monetary policy easing.  The fall in consumer prices over the last few months had already allowed the People’s Bank of China to cut lending rates twice.  In response to the additional leeway given to the central bank after a fourth consecutive month of inflation cooling, stocks have risen in expectation for monetary policy easing. 

 

The Shanghai Composite Index has risen 3% over the past 5 sessions while the Shenzhen Composite Index rose 1.5% to 909.69.  The rally signals confidence that the slowing growth in China will encourage the government to make moves to boost growth.  Economists and strategists expect more rate cuts as well as cuts in the reserve requirement ratio.  China is also in a unique position due to their strong financial position and could cut taxes to support domestic demand.  Even in the face of slowing growth, China remains an attractive market as they are one of the few regions that offer 7-8% growth prospects at less than 10 times estimated earnings. 

 

It is time to start adding or initiating new positions in the Chinese market, which is trading at spectacularly valuations relative to its 30-year history.  The Chinese government is in the process of launching another major round of Fixed Asset Investment (FAI) focused economic stimulus programs. This has largely reduced China’s hard landing risk and should remove market concerns. The Excel China Fund is well positioned to take advantage of these opportunities in order to add companies with good growth prospects and strong balance sheets, which we believe will positively reward investors in the coming years. 

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Author: Excel Funds Management

We Are Leaders. Our Focus is Undivided. Excel Funds is Canada’s specialist in Emerging Market investment opportunities. We pioneered Emerging Market mutual fund design and distribution in Canada. Our focus is undivided – Emerging Markets is all we do. Our Mission Is To Offer Canadians True Global Access By offering Canadians access to rapid growth markets, Excel Funds provides truly global and diverse investment value. Our clients want consistent, responsible and intelligent solutions – we will never stop being challenged and deliver on client expectations. We Listen. We Are Determined To Deliver. Our clients want to understand better. Excel Funds is the only company dedicated to providing investors with actively managed, best-in-class Portfolio Managers based in regional markets. In order to deliver deeper understanding, we are not removed from unique cultural, political and economic experiences. We Initiate. We Create. Investors benefit from strong, sustainable growth. To create wealth for our clients we will: • Offer globally diverse opportunities to capture shifts in world economies • Not resist change and continually lead in Emerging Markets global growth • Engage world class institutional managers for retail investors We Are Passionate. We Will Never Stop Innovating. True leadership is enabling and seeks a positive outcome for all invested. We will not rest on past success, and continue to provide clients with: • Innovative fund structures • Canada’s largest & most comprehensive Emerging Markets products • The best institutional level Portfolio Managers • World class on-the-ground active managers • A singular focus on Emerging Markets, the driver of global growth

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