Investors who considered China as being too risky with inadequate fiscal intervention were failing to acknowledge the flexibility of the economic measures available to its authorities, an Asian markets investment director said yesterday.
"One reason why Chinese equities have been out of favour is investors will say 'too little, too late with your policies, why don't you cut interest rates', but there are so many other levers [to use], for example, there are policies to try to promote capital markets," Fidelity Investment Management (Hong Kong) investment director Catherine Yeung said.
An initiative the Chinese government recently used to promote capital markets was to issue a list of 400 models of cars the procurement people within China were only allowed to use.
"All 400 models were Chinese [brands]. That's actually going to hurt the likes of Audi because Audi is a very well-known brand ... a lot of hotel cars and government cars are Audis," Yeung said.
"So they can just use all of these different levers without having to move interest rates.
"I'm not saying China is risk free at all, but what I am saying is people have underestimated the flexibility the market has because it is a demand-driven one."
The general Asian outlook emanating from investors also did not tend to take into account the income-producing capacity of the stocks in the region, she said.
"The dividend yield for Asia ex-Japan is about 2.9 or 3 per cent, so it beats the world average of about 2.7 per cent," she said.
"When you look at total returns ex-Japan in Asia, about 60 per cent is income versus 40 per cent which is capital appreciation. And again foreign investors are very taken aback about the income Asian companies can pay out."
