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Institutional investors confident on China, says Barings

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Nearly half (45 per cent) of institutional investors believe corporate governance in China has improved over the past three years, according to research by Baring Asset Management.

An equal number, meanwhile, believe it has remained the same.
 
According to the survey, institutional investor confidence towards China remains high, with half (50 per cent) of those expecting to increase their exposure to China as corporate governance improves.  Just under three-fifths (59 per cent) said they were currently overweight or neutral in China versus 35 per cent who are underweight.
 
However, institutional investors remain cautious on China GDP growth with respondents predicting an average of 5.4 per cent annual GDP growth over the next few years.  According to the International Monetary Fund, GDP for 2014 and 2015 in China is set to grow at around 7.5 per cent and 7.3 per cent2 respectively.
 
David Stevenson, head of product and business development at Baring Asset Management, says: “Our research underpins our view that China presents a strong investment case to institutional investors.  It is clear to Barings that corporate governance has improved significantly and as the country continues to implement far-reaching reforms, we believe there will be more sustainable economic growth over the long run.
 
“The good news is that China is becoming more accessible to foreign investors, and overall, on both an historic basis and versus the rest of the world, China remains very attractive in our view.”
 
The research by Barings also found that nearly half (46 per cent) of investors expect Asian emerging markets, including China, to outperform European equities over the next two-to-three years, while over half (54 per cent) expect Asian countries, in general, to outperform global emerging markets. 
 
According to respondents, Asia growth will be driven by a number of factors, with investors mostly focused on expanding middle classes (identified as the most attractive feature by 70 per cent of respondents), lower levels of government and private debt (33 per cent) and younger populations (30 per cent).
 
Stevenson says: “Despite the recent retrenchment in emerging markets, we continue to believe that Asia and emerging markets will experience strong growth over the long-term.”

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