Fidelity International sees stock picking from next year

Global asset management firm positive on investment prospects in China despite economic slowdown

Fidelity International, a leading global asset management firm, expects 2016 to be a year for stock picking in China, notwithstanding the recent market volatility.

Ning Jing, portfolio manager of the United States-based Fidelity International's China-focused fund, said on Tuesday that China's strong economic reform agenda will drive new or even contrarian investment opportunities next year and will help offset the economic slowdown.

"We will stay focused on A-shares as there are many unique investment opportunities that do not exist in Hong Kong or other overseas markets," she said in a news conference in Hong Kong.

China's A-share market has become increasingly linked with the global markets, sparking growing interest from international investors. The market crash that wiped out some $5 trillion between June and August triggered volatility in the global capital markets.

Ning said Fidelity's China investment strategy is about handpicking individual companies that have the potential to outperform in a slowing economy, rather than being based on the expectation of strong economic recovery next year.

Despite the market consensus that the Chinese economy will continue to face downward pressure, Fidelity shrugged off concerns about large capital outflows.

"An overly pessimistic or even an optimistic reaction in the market could mean opportunities for smart investors," Ning said.

The Chinese regulator in March tripled the investment quota granted to Fidelity's subsidiary in Hong Kong under the Qualified Foreign Institutional Investor program to $1.2 billion, making it the first nongovernment financial institution to gain a quota exceeding $1 billion.

The move was seen as a step by the government to expand foreign institutional investors' exposure to the A-share market.

On Tuesday, the benchmark Shanghai Composite Index rose marginally by 0.32 percent to close at 3,456.31 points. The gain was led by a rally in property stocks on hopes of further policy support for the sector.

The International Monetary Fund's decision to include yuan in the Special Drawing Rights basket from October next year could be a positive step for Chinese stocks in the long run, analysts said.

"The yuan inclusion has lifted sentiment in the Asian stock market," Adrian Zuercher, the Hong Kong-based head of Asia asset allocation at investment bank UBS, was quoted by Bloomberg as saying.

"We think Asia is attractively valued and there is too much pessimism on China."