Business

Thursday March 19, 2009

China’s gearing level remains lower than its regional peers


KUALA LUMPUR: Gearing levels in China remain lower than those of its regional peers, indicating more room for lending, fund managers said.

Hong Kong-based asset management group Value Partners Group Ltd senior fund manager and executive director Renee Hung said the loan to deposit ratio in China was 69.3% against the regional average of 89.3% as at September 2008.

“This is an indication that banks are flush with liquidity and the healthy balance sheets would further boost loans growth, going forward,” she said at the CIMB Private Banking Investment Conference 2009 yesterday.

Banks in China showed incremental loans growth for almost the whole of last year despite the credit crunch faced by other major economies, which indicated a good confidence level, she said.

China’s government is also in the process of implementing an expansionary monetary policy, targeting 5 trillion renminbi, or a 16.5% increase in new loans, according to Hung.

Current economic data also showed that China was at an early phase of a multi-decade growth, she said. “China’s inland regions are still only 20% to 30% urbanised,” Hung noted .

“This shows that the urbanisation process in China would fuel domestic and productivity growth over the next decade,” she said.

She said investors would also be drawn to the fact that China’s equity markets, especially its blue chips, were currently trading at very low valuations.

“Companies in sectors such as infrastructure are likely to rebound strongly due to fixed investment growth driven by the stimulus package,” Hung said, adding that, “we are also positive on the energy sector over the long-term, as it is a non-renewable resource”.

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