Last updated: 10:59 / Monday, 16 November 2015
The Cerulli Edge

A 30% Fall in Total AUMs of Funds Focused on Greater China Region is Unnerving, but a Long View is Needed

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A 30% Fall in Total AUMs of Funds Focused on Greater China Region is Unnerving, but a Long View is Needed
  • Cerulli maintains that the recent turmoil should be seen as a cyclical blip
  • China's economy is on course to overtake the United States, while its population of 1.35 billion includes around 100 million retail investors
  • Deutsche Asset & Wealth Management describes its stance on the country as "strategically overweight"
  • "Fidelity is better equipped than most to pick the stocks that will bounce the highest from the recent fall,"

Asset managers offering China-focused funds to European investors will need patience in abundance as they await a recovery in flows after growth in the world's second-biggest economy slowed and its stock market plunged, but the rewards will justify the pain in most cases, according to the latest issue of The Cerulli Edge – European Monthly Product Trends Edition.

The global analytics firm, accepts that some asset managers may have to axe certain products, while others will withdraw completely from China. However, it maintains that the recent turmoil should be seen as a cyclical blip.

"China, like the rest of Asia, continues to offer huge opportunities," says Barbara Wall, Europe research director at Cerulli. "Granted, a 30% fall in three months in total assets under management of funds focused on the greater China region is unnerving but a long view is needed. China's economy is on course to overtake the United States, while its population of 1.35 billion includes around 100 million retail investors, according to some estimates."

The company notes that China's unusually high concentration of retail investors is one of the factors behind the panic reaction to what is a slowing of economic growth, rather than a recession. Also, the Chinese government still has much to learn about how best to intervene in the market when things go wrong.

"China is uncharted territory, which means there are no easy answers. However, the fundamentals remain attractive. AUM data, along with share prices, looks much better when compared with five years ago than with three months ago," says Wall.

The firm notes that despite suffering some setbacks in China, Deutsche Asset & Wealth Management, one of the biggest European investors in Asia, describes its stance on the country as "strategically overweight". It is among those who view the situation as a "buying opportunity".

Fidelity, one of the longest established players in Asia, has also run into glitches in China, but Cerulli believes the firm will be rewarded in the longer term. "With sizeable teams of analysts looking specifically at China, companies such as Fidelity are better equipped than most to pick the stocks that will bounce the highest from the recent fall," says Brian Gorman, an analyst at Cerulli.

"Volatility is likely to linger, but the rewards will be high for those willing to play the long game. For some, this will mean closing certain products and returning to the drawing board, to come up with a better offering," adds Gorman.

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