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Economic restructuring to boost investment return in China, KKR says
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THE economic transition and capital pour into China's service sector will drive a better investment return for the country, US investment firm Kohlberg Kravis Robers Co LP said in a report today.
"Over the past 10 years, capital in China was misallocated badly to drive growth and employment in areas of the economy that either lacked competitive advantage or did not create productive returns on capital," Henry McVey, Member and Head of Global Macro and Asset Allocation at KKR, said in the report.
"But we envision it differently today since China now has a fast growing services economy that is larger than its combined construction and export sectors to support a better stock market in a near-term," McVey added.
The world's second largest economy rose 7.4 percent in 2014, the weakest expansion in the 24 years, National Bureau of Statistics said in an annual report on Thursday. Analysts warned the figure will go down to around 7 percent this year due to a further cooling real estate sector.
While Shanghai Composite Index rallied to world's top performer last year as the market was bolstered by optimism over monetary easing earlier last year, while the enthusiasm for stock investment was further encouraged after the central bank unexpectedly cut interest rates in last November.
"Though it may pause, we do not believe that the current rally in A-shares is over," said McVey, as he pointed out that a low inflation environment favors stocks over real estate from an asset allocation standpoint.
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