“We believe that demand from China will continue to heavily influence emerging market performance, and that a hard landing is less likely now that China’s growth rate has moderated to a more sustainable level,” according to Lazard Asset Management’s fourth quarter outlook in 2011.
However, China’s financial sector may be a cause for concern. The managers of the Matthews Pacific Tiger fund underweight Chinese financials because of greater activity in the “gray loan” area and “shadow banking” sector outside of the normal banking system.
Rajiv Jain of the Virtus Foreign Opportunities fund does not have a high opinion of Chinese banks’ management or accounting practices. He is also concerned that the government’s attempt to curb property prices may hurt banks.
Shanghai Composite Index
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Max Chen contributed to this article.