While it offers unique opportunities in terms of its scale and manufacturing capabilities, China’s fortunes have been intertwined with the global economy – if wages rise, it becomes less competitive and if export demand falls, then so do its earnings.
China’s performance has disappointed of late, with weaker exports and imports and signs of a property bubble. And, in March 2012, the Chinese Government revised its annual growth target for 2012 down to 7.5%, creating some anxiety.
Despite the slowdown, the HSBC purchasing managers’ index for December rose to 51.5 from 50.5 a month earlier, resulting from increased government spending on infrastructure. Meanwhile, predictions vary about what growth China will see in 2013. The official view is 7.5%.
China may suit you if you have predominantly UK and European holdings and favour diversification. What’s more, valuations are roughly a third of the peak level reached in 2007. However, China is far from being the only Eastern player, and although Japan has been a disappointment for investors over the last couple of decades, it is suddenly looking a little more promising.
New Japanese prime minister Shinzo Abe has implemented a programme of fiscal stimulus and, although there have been false dawns before, some commentators believe that Japanese equities are looking good value. There are many funds on offer, so seeking guidance on those likely to outperform could make sense.
There is also a wide range of funds focused on the Asia Pacific sector. Some may be heavily influenced by China, but others may be investing in less promoted countries such as Malaysia, Thailand and Indonesia.
The region has also been bolstered by improved relationships with the United States – US President Obama described the region as a ‘top priority’ in terms of its importance as a leading trading partner and in having a pivotal role in the United States recovery.
With many western countries being in the doldrums, it is no wonder eastern markets are receiving increasing attention.
The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.