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Olympic gains for Gartmore? By Rob Griffin
All eyes will be on China this summer when Beijing hosts the 2008 Olympic Games and investors who have put their faith in the region will be hoping the showpiece spectacle will help generate bumper returns.
One such person
A prime example is the fund's holding in Focus Media, which operates advertising channels in both traditional and new media. "There will be enormous interest in the Games and companies will spend a lot of money on advertising," he reasons. "Focus will benefit as it has a very large network of advertising space."
The overall aim of the Gartmore China Opportunities fund is to achieve a long-term return from investing in companies that are either registered in Hong Kong or China, or which carry out a large percentage of their business in these regions. "We are looking to find companies in which there is the possibility of unexpected earnings and profits growth that the market hasn't picked up on," he explains. "In these cases, we think the shares are mis-priced and will grow in the future." Potential to increaseTo stand any chance of being in the portfolio, a stock's share price must have the potential to increase by more than 20%. It will then be analysed to gauge how risky it is and what effect its inclusion is likely to have on the other stocks. "We have dedicated specialists in every area who know exactly what's going on and can help us generate ideas for the portfolio," he says. "Having focussed teams gives us a real edge and we've demonstrated this over a long period of time."
It's also important to consider the outlook for different sectors. "The dynamics of the industry in which these companies operate have to be better than people are expecting as well," adds Awdry. "We'd want to see strong demand and revenue growth, and for a firm to have a niche position to capture the trend."
At present, he is positive on consumer companies - due to the rapid urbanisation of the country and the fact people are getting richer - as well as industrial stocks involved in areas such as shipbuilding.
"I also like coal, because we've seen a real tightening up of supply and demand at an industry level," he adds. "There has also been a lot of consolidation which is good for large companies as their prices increase and their margins benefit."
The fund, which is benchmarked against the MSCI Zhong Hua Index and sits in the Asia Pacific (ex Japan) sector, currently has around 75 holdings. Of these, the top 10 positions account for almost 35% of assets under management, and include China Mobile, PetroChina and China Coal Energy.
As far as sectors are concerned, financial stocks have the lion's share with 30.5%, followed by the 16.3% in Consumer Discretionary and industrials which have a 14.1% share. Other areas include energy, telecoms and materials. Work in progressAwdry, who took the reins of the fund in the summer of 2006 from the departing Philip Ehrmann, describes China as a "work in progress", but insists the country has made great strides over recent years and believes the reform agenda will continue to be a dominant theme in the portfolio. The key to success, he adds, is finding out which companies have the ability to take advantage of this theme.
"The economy has effectively been growing at double digit rates for a number of years now," he explains. "The Government is also committed to a number of reforms, such as cutting taxes, while people have more disposable income."
The rapid urbanisation of the country is playing a major part in this process. "People are migrating from the rural areas for better jobs which pay more," adds Awdry. "You're seeing more people in cities and they're becoming richer. They have more money to spend at the end of the month on food, education and recreational items."
It's not something he sees changing anytime soon. "I go out two or three times a year and every time I learn something new," he says. "What really stands out is the vibrancy of Chinese high streets. People have more money and are feeling confident about their outlook, and this means they are starting to spend."
On a personal level, Awdry is focused on delivering for investors. "We want to build on the performance achieved in 2007," he says. "We are motivated, incentivised and committed to making sure that this product performs."
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