Olympic games expected to boost investor confidence in China

Investment managers are positive about the future of China, believing the Olympics will promote the country and its economy in an optimistic light, according to the Association of Investment Companies (AIC). Talking with managers from some of the leading investment houses active in China, the AIC has concluded that managers believe China is set to be the world’s economic power house for decades to come.

Pinakin Patel, Pacific client portfolio manager at JP Morgan Asset Management believes the Olympics will benefit the city of Beijing and its future growth plans. He said of the $34 billion spent on the games, $26 billion will be spent on infrastructure for the city itself.

“The Olympic games have provided a major economic boost to the Beijing region. The 2008 Olympics represents the second largest public works project ever undertaken in China. Beijing has spent US $34 billion to build the Olympic village, improve its transportation and telecommunication infrastructure, restore historic heritage sites and create a cleaner environment,” commented John Millar, manager of Martin Currie Pacific.

According to Peter Hames, manager of Edinburgh Dragon Trust the games are not a significant factor behind investor interest in China. “It is the phenomenal growth the economy has achieved, expanding at about 9% a year over the last decade, and its future potential,” he said.

In general managers contacted by AIC believe China has held up well despite the impact of the credit crunch. “While China’s economy has slowed recently due to the credit crunch, it will be a key driver for global growth for decades to come,” said Hames.

Even though China’s economy may be affected to an extent by the credit crunch and more so if markets continue to fall. “Due to buoyant revenue receipts last year, China enjoys a relatively rare position of being able to support the economy through fiscal pump priming if needed. Infrastructure and healthcare would be the most likely beneficiaries as the government could justify the expenditure as being part of its objective to achieve a more ‘harmonious society,” commented Peter Dalgleish, manager of Pacific Assets.

Top 12 investment companies with the highest percentage exposure to China

Fund	China %	Hong Kong %	Taiwan %	Total (%)
JPMorgan Chinese	42	30	26	98
Henderson TR Pacific	30	13	9	52
Pacific Assets	16	19	17	52
Fidelity Asian Values	6	30	15	51
INVESCO Asia	5	27	15	47
Schroder Asia Pacific	7	25	12	44
JP Morgan Asian	12	19	7	38
Henderson Far East Income	6	15	17	38
Edinburgh Dragon	7	19	7	33
Martin Currie Pacific	10	13	9	32
Aberdeen New Dawn	3	19	7	29
Aberdeen Asian Income	2	9	12	23