Greater China markets continue to show relatively attractive market valuations for investors despite strong gains in recent sessions, according to Wilson Wong, Fidelity International's specialist when it comes to investing in the region.
"While it is likely that we will continue to see cautious macroeconomic data in coming months, I believe there are buying opportunities in the Greater China region," says Wong, who manages the Fidelity Funds -- Greater China Fund. "A global inventory re-build after months of strong de-stocking and unprecedented government policy actions have all helped boost market demand and sentiment for Greater China."
The global recession will present a challenging operating environment for companies in the Greater China region over the short-term, Wong says, but over the medium- to long-term, the region will probably benefit from favourable demographics, structural growth and high saving rates.
Hong Kong-based Wong believes that firms in Greater China with strong balance sheets and solid management teams are likely to actually grow their market share during a bear market.
"The long-term winners will be those companies that present good franchise value at reasonable valuations so I have raised exposure to firms with strong market positions that lost ground during the sell-off, particularly in the consumer discretionary, technology and financials sectors," he says.
Wong has reduced exposure to selected telecommunications and utilities stocks because there has been heightened interest in these stocks among risk-averse investors since the fourth quarter of 2008, which has lead to a sharp rise in their relative valuations, making them unattractive. He sees opportunities in the property sector.
The fundamental growth story in China remains intact despite a slowdown in overall growth, Wong says. While there are near term risks owing to the global slowdown and domestic cyclical reasons, he says the positive long-term structural factors should bode very well for China and the wider region.
"We have seen growth slowdown but China clearly has the capacity and willingness to promote economic growth and more recently we have seen an up-tick in the purchasing managers index which rose above the expansionary mark of 50 in March and April," he says.
Wong continues to believe that Hong Kong presents solid investment opportunities because it has a solid exposure to China as well as a number of robust, domestic companies.
"Not only does Hong Kong have a substantial exposure to China but it also has many companies with excellent global franchises. Domestically, I see the property sector is likely to lead the way out of the bear market. This market is still too conservative in its assumptions, just like what happened to China in Q4 2008."
Despite the impact of the global recession on Taiwan, Wong is generally positive on this market.
"As the impact of the ongoing global recession on Taiwan's economy intensifies, the government has announced a series of stimulus measures including tax cuts, shopping coupons and infrastructure spending to support the domestic economy," he says.
More importantly, improving cross-strait relations is a key inflection point for investments in Taiwan, Wong says.
Direct transport, postal and trade links have been established, a comprehensive economic co-operation agreement with China has been signed and there is the potential for further cross-strait deregulation. Thus, Wong says he is generally positive on Taiwan in the long-run and expects the domestic economy to further benefit from its relationship with China.