e-fundresearch.com: What is the current size of the fund?
Laura Luo: €1,717.2million as at 30th September 2014.
e-fundresearch.com: Do you also manage other funds or mandates? (If yes) What is the total amount of assets you manage currently?
Laura Luo: I am the Head of Hong Kong China Equities. I am the lead manager of the Baring Hong Kong China Fund and one segregated mandate with assets of €204.4m. I also act as back-up manager for all of Barings’ other Hong Kong China pooled funds and segregated mandates. The total amount managed by the Hong Kong China Equity team was €2,132.9 million as at 30th September 2014.
e-fundresearch.com: Why is it time for asset allocators to put increased focus on the Chinese market again?
Laura Luo: With China undertaking major structural reforms under the new leadership, we do see potential rerating for China’s equity market over the long-run. The most important elements of the third and fourth Plenary Meeting of the 18th Congress of the Chinese Communist are the following two, which in our opinion, will support the re-rating of China:
-) Moving China firmly into a more market-oriented approach that is more suited to current needs. Market forces, the Plenum has concluded, should be the driving force of the economy, and the decisive force in resources pricing and allocation, while the state-owned enterprises (SOEs) should be reformed to improve efficiency and allow more participation of private investment in the state dominated sectors. An increased role for the market may help, in our view, to improve overall investment returns.
-) Initiating reforms to ensure independent jurisdiction and proper rule of law. This will not only help to resolve persistent economic, social and legal injustices, but will also better protect property rights in general and minority shareholders’ rights in both state-owned and private companies. This in turn should, we believe, help to reduce some of the risk premium associated with investing in China.
Moreover, we’ve seen progress of China moving towards the new economy with government support and strong private investment. All these are pointing to a more balanced and sustainable economic growth model in the long-run.
On the other hand, Chinese equities are trading at very attractive valuation not only compared with historical average but also versus other major markets in both DM and EM world. Short-term volatility and weakness actually provide good entry points for long-term investors.