CHINA - Pension schemes need to be cautious about investments in China, First State Investments warns.
First State Investments’ Angus Tulloch points out that as most Chinese companies are still majority state-controlled, corporate governance and transparency issues are rarely dealt with adequately.
Tulloch – who is head of global emerging markets and Asia-Pacific, excluding Japan, equities – explained: “Corporate governance is a problem because the principal interests of the main shareholder, that is the state and its representatives, are not necessarily those of the minority shareholders.
“They have lots of other loyalties, such as to the local party, and they are often not going to make the difficult decisions that will make them become properly competitive in the world.”
But Tulloch added investors were likely to fare better in Asian equities than in other markets this year.
“We like the Thai banking sector, there are some reasonably-priced manufacturing players listed in Hong Kong but operating in China, we like consumer staples in Korea, and we like financials in Hong Kong.”
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