Top Biz Photos

Fund winds blowing eastward

(China Daily/Agencies)
Updated: 2009-12-04 08:05

Goldman Sachs recommends buying automobile, healthcare, realty shares. [CFP]

China and other fast growing developing nations will lure more funds away from advanced economies through the next two decades, according to Goldman Sachs Group Inc.

Those flows will counter any impact on China's capital markets from government measures aimed at curbing asset bubbles, said Thomas Deng, Goldman Sachs' head of China strategy.

Corporate profit growth in China, estimated at between 20 percent and 30 percent on average next year, will fuel an equity market rally, Deng said. He recommended buying shares in China's automobile and healthcare industries, and companies with large land reserves in Shanghai ahead of next year's World Expo.

"Western countries' money is moving to oriental countries, and that means developed world money is flowing into developing countries," Deng said. "This will be a trend in the next 10 to 20 years."

Developing economies will expand 5.1 percent in 2010 compared with 1.3 percent growth in advanced nations, according to the International Monetary Fund. Asia-excluding-Japan equity funds posted net inflows of $975 million in the week ended Nov 25, bringing the total for the year to $18 billion, EPFR Global said on Dec 1.

Flows into China equity funds reached a year-to-date high of $827 million, according to EPFR, which tracks funds holding $10 trillion worldwide.

China index forecasts

Goldman Sachs forecasts Hong Kong's Hang Seng China Enterprises Index will reach 17000 by the end of next year, according to Deng. That's higher than his previous forecast of 16800 in an Oct 29 report. The gauge added 0.88 percent to 13459 yesterday.

The mainland's CSI 300 Index will hit 4300 by the end of 2010, Deng said. Hong Kong's Hang Seng Index will climb to about 27000 next year, Timothy Moe, an analyst at the brokerage, said at the same media briefing. The CSI 300 has soared 97 percent this year, while the Hang Seng has surged 56 percent.

An unprecedented $1.3 trillion of loans this year and a $586 billion stimulus package pushed China's economy to record 8.9 percent growth in the third quarter, the fastest expansion in a year. The credit boom helped the Shanghai Composite Index rally 79 percent this year and Hong Kong's H-share index surge 70 percent. Home prices in 70 major cities in the mainland climbed at the fastest pace in the 14 months to October, the government reported on Nov 10.