Investors prepared to accept short-term volatility for the potential of longer-term rewards may already have considered China as part of the solution.
China’s economic expansion by 9% last year and 6.1% in the first quarter of 2009 is nothing short of miraculous when compared to that of western nations, despite it representing a low point for the country.
This growth has been delivered largely on the back of spending on massive infrastructure projects by the Chinese government.
Philip Ehrmann has managed the Jupiter China fund since its launch in October 2006. He invests in a fairly concentrated portfolio of 50-60 companies and has a mid and small-cap bias.
He said: “Although the fund is only two-and-a-half years old, I’ve been managing money in the region for years and my turnover rate is as low as it’s ever been. Sometimes it pays to set your sails and let the wind fill them.
“There is a subtle shift about to play out in the consumer discretionary sector as confidence continues to build, principally in the larger cities. Curiously, millions of people in the country are being encouraged to spend money on agricultural equipment, while those in the cities are being encouraged to spend money on things like flat-screen TVs.”
Mr Ehrmann is enthusiastic about healthcare reform.
He said: “The government is trying to reduce the cost of pharmaceuticals by forcing hospitals to use the lowest-price producer. I hold United Laboratories, which is essentially a bulk chemical manufacturer and one of the leaders in the antibiotics field. Although they will be forced to reduce their prices, they will gain on volume.”
The Jupiter China fund is down by 1.7% over the past year, compared with a loss of 10.8% by the sector-average fund.
When asked what time horizon he had in mind for investors, Mr Ehrmann said: “I think three to five years is reasonable. I invest in the fund myself and have taken the opportunity to buy in at some of the lows in 2008.”
Barry O’Neill is a chartered financial planner with Thomson Shepherd and can be contacted on 01224 619215