Economy

Demand to grow with incomes: Global X

By Allen Wan (China Daily)
Updated: 2010-10-12 10:42

SHANGHAI - China's consumer discretionary stocks are becoming more attractive as incomes rise and the economy relies more on domestic spending, according to New York-based asset manager Global X Management Company LLC.

Rising Chinese interest rates won't be a deterrent because consumption growth is based more on higher incomes than on credit, Bruno del Ama, chief executive officer of Global X, said in e-mailed comments on Sunday.

"A stronger yuan will make Chinese exports a little less competitive, further highlighting the importance of the development of a local consumer base," said Del Ama, whose China consumer exchange-traded fund has gained 24 percent this year, beating 93 percent of rivals, according to data compiled by Bloomberg.

He expects increased demand for goods as the nation's per-capita income jumps.

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"We are seeing consumer growth strength across the board, especially in consumer discretionary items as millions of Chinese move into the $5,000 to $6,000 salary base, which is when consumers typically start moving from pure staple-type consumption to discretionary items," Del Ama said. "Areas where we anticipate significant growth include private education, autos and luxury goods."

A possible upgrade of China's debt rating by Moody's Investors Service would be "well deserved" given the nation's rebound since the global financial crisis, according to Evelyn X. Hu, vice-president of Global X.

"China's resilience from the global financial crisis is further evidence of the growing shift in reliance away from exports and towards organic, local growth," she said.

Chinese investors already view domestic bonds as "risk-free" products, said Hu.

Bloomberg News