Falling foreign investment and a prolonged slump in the real estate market are just some of the issues weighing on China’s economy and stock market. However, things may be about to turn around for the Asian powerhouse, with consumer prices rising 0.7% annually in February, breaking out of months of deflation. Factory activity in China also expanded for a third straight month in January. Stock markets are also recovering, with the Shanghai Composite Index hitting a five-year low in early February and rising more than 6% in the past month to surpass 3,000 points. One portfolio manager said the developments, which come after a series of government stimulus measures, made China an attractive destination for investors again. “China is a lot more interesting this year than it’s ever been,” Kamil Dimmich, partner and portfolio manager at North of South Capital, told CNBC’s “Squawk Box Asia” on Monday. “We’ve been digging for value. We’re still relatively underweight. China stocks, but we’ve been reducing our underweights because some of the stocks there have become very, very cheap.” He said it might be time to start building a positive case for China, but “it’s probably not very, very bullish right now. time.” Shaun Rein of China Market Research Group agreed. “Let’s be clear, the Chinese economy is weak, but it’s not that weak,” the group’s founder and managing director told CNBC’s “Squawk Box Europe” on Monday. “If you’re a multinational, if you want to be in Drive growth over the next three to five years, then the next China is China. It’s not India, India’s GDP is only one-sixth of China’s. It’s not Vietnam. These are small markets. So I actually think investors should again Focus on China’s long-term development, it is definitely worth investing in.” He acknowledged that there are some short-term risks, “because consumers are still nervous about the economy, they will buy less.” However, he said he expected areas such as health and wellness to Spending will continue, and the shoe brands Salomon and Arc’teryx (both owned by New York Stock Exchange-listed Finnish retailer Amer Sports) will be chosen because of their good reputation in the Chinese market. Stock selection Dimich said that when selecting Chinese stocks, he likes “companies with some pricing power, which typically have a strong market position (and) high barriers to entry.” “We own a lot of consumer-related stocks, certainly including online retailers, that have become real value stocks for us,” he added. To him, Xinyi Glass and Fufeng are two companies that may not be well-known. Fufeng Group produces products such as flavor enhancers, fertilizers and starch. Its shares have been essentially flat over the past 12 months, but have risen 17% over the past three months. Meanwhile, shares in glassmaker Xinyi Group have fallen more than 32% in the past 12 months but are up 11% in three months. The company makes glass products for construction companies and automotive giants like Ford and General Motors. “There is indeed one significant competitor and many smaller competitors. Because of their size, they can remain profitable even with relatively low glass prices,” Dimic said, adding that the company will continue to pay ” “Very high” dividends. Both Fufeng and Xinyi Glass are listed on the Hong Kong Stock Exchange. Fufeng Holdings holds the iShares MSCI China Small-Cap ETF, while Xinyi Glass Holdings holds the Franklin FTSE Hong Kong ETF and the SPDR S&P China ETF.
