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Jupiter expects China to weather global slowdown

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08/02/2008

As the Chinese welcome in the Year of the Rat, Jupiter says China will be able to weather the effects of a global slowdown despite Asian stock markets suffering declines.

It says this is due to its domestic economy remaining well-supported and company balance sheets being healthy.

Philip Ehrmann, manager of the Jupiter China and Jupiter Asian Funds, said: “Share price volatility has been further exacerbated by the Chinese government’s recent actions aimed at curbing inflation. Nevertheless, a combination of strong balance sheets, robust productivity and a steadily appreciating currency should partially offset this.

“We do not believe the long term secular growth trend in China will become derailed by the problems in the US, as growth is being driven by a process of massive urbanisation. The Chinese government will continue spending significant sums on infrastructure to deal with the inevitable social chaos caused by mass migration. Environmental spending is another government objective that throws up interesting opportunities.

“At a company level, managements are becoming increasingly open and shareholder friendly, with better websites and improved corporate governance. It is also encouraging to see company managements paying attention to growth and profit, moving away from the ‘profitless growth’ of the recent past.”

As a result of these factors, Jupiter remais positive on the outlook for Chinese companies. It is taking advantage of the fact that share prices have pulled back to levels not seen for 18 months to build up positions in stocks where it has high conviction.

 

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