China and European equity investors at Baring Asset Management remain resolutely bullish on their respective markets despite the inevitability of a slowdown in the US economy. Lilian Co, manager of the Baring Hong Kong China fund, and James Buckley, manager of the companyÆs European Growth Trust and Europa funds, each cited the same reason for such confidence û burgeoning mass-affluence in emerging markets.

For Co, this is a general sign that China is becoming more reliant on its own economy to support its domestic companies, while for Buckley the development of markets such as Eastern Europe but also including China means Europe need no longer rely on US consumption to drive its economic growth.

ôIf there is a recession in the US that will be a problem but if it is a moderation of growth investors will not panic,ö Cho says. ôWe like domestic consumption plays. The China savings rate and property prices are rising at the same time as income. People are no longer focused just on basic goods, though they are price sensitive, so consumer goods companies with strong brands will benefit.ö

For Buckley luxury goods brands in Europe will be one of the key beneficiaries of the same trends that Co hopes will sustain ChinaÆs economy. ôEurope has become a more diversified market in recent years though US markets remain a driver,ö he says. ôThe rising middle class in emerging countries including China is providing a new market for European companies, including luxury goods providers like Porsche.ö

Another main reason for the positive outlook for both Co and Buckley is the attractive valuation of companies in their respective regions of expertise.

Buckely cites the fact that the FTSE100, despite bursting through the 6,000 barrier for the second time in 2006 earlier this month, is still 10% below its dotcom era peak, and pan-European companies trading at 12 times earnings compared to high watermark PE ratio of 22 in 2000.

Similar prospects for a re-rating exist in China, according to Co, due to the underlying increasing resilience of domestic companies.

ôCorporate governance is improving with several companies starting to publish quarterly results,ö she says. ôThe estimated PE ratio of 12.5 for 2007 is at a discount to the regional average. People like to compare China with India but the PE is 17 there already.ö