Better returns expected as more funds go into services
Print Edition
CHINA can expect to see better investment returns as more funds are injected into the country’s service industry, US investment firm Kohlberg Kravis Robers Co LP said in a report yesterday.
“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 advantages 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 the near term,” McVey added.
The Shanghai Composite Index rallied to become the world’s top performer last year as investors were optimistic over monetary easing last year and after the central bank unexpectedly cut interest rates last November.
“Though it (the rally) 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.
The world’s second largest economy rose 7.4 percent in 2014, the weakest growth in 24 years, the National Bureau of Statistics said on Thursday.
Analysts warned the growth may fall to around 7 percent this year as the property market continues to cool.
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