Investors need to recognise the difference between strong economic growth and investment opportunities.
Investors are still struggling to understand that strong economic growth from a macro perspective does not necessarily translate into strong investment returns, according to the group head of equities with an international funds management house.
"The big economic figures do not translate into stock market returns," Aberdeen Asset management Asia managing director and group head of equities Hugh Young said.
He cited China as a classic case in point.
"The issue for us in China is yes the growth has been strong, we accept that and you can't turn back the clock. The genie is out of the bottle and that's tremendously exciting," Young said.
"But can you find the right way to harness the genie? Can you actually find the right stock? And that's where you have this disconnect between macro factors and where you put your money."
And China in particular throws up other obstacles to overcome unlike any other market in terms of investing, Young said.
"The greatest challenge is not so much the numbers - although there are question marks with the numbers - it's the direction," he said.
It means companies that fund managers like Aberdeen are invested in can suddenly change their activities simply because of a new directive from the Chinese government that must be obeyed.
"There is no thought about minority shareholders or anything like that and they will just go ahead with what they are doing. So direction is an issue," Young said.
The two non-consecutive alphabetic letters encountered most often last week caused more controversy than the underlying policy they represented, Wouter Klijn writes.... read more »
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