China's Slowdown is Totally Manufactured: Fund Manager
China's gross domestic product growth slowed to 9.1 percent in the last quarter, its slowest pace in two years. But one fund manager says the moderating pace is exactly what the Chinese government wants and he remains bullish on the country's stocks.
"The slowdown is totally manufactured, the Chinese government has been angling for this for several years now," Aaron Boesky, CEO of Marco Polo Pure Asset Management, told CNBC on Thursday. "It's amazing how well the Chinese, the People's Bank of China and the Chinese central government have done, achieving their goals that they've set out."
Chinese policymakers have been trying to battle inflation, which hit 6.5 percent in July, the highest level in three years. Since then inflation has cooled to 6.1 percent in September.
Boesky believes with inflation cooling, Chinese stocks look extremely attractive and investors who have shunned the stock market this year will begin to return. He says Chinese stocks are at the lowest price-to-earnings multiple in history at 10.5-times 2011 earnings.
Being bullish on Chinese stocks hasn't been a profitable trade this year. Boesky's Marco Polo Pure China Fund is down 25 percent year to date compared to a decline of 15 percent for China's A-share market. But since its inception in September 2004, the fund is up 142 percent.
Boesky believes a big catalyst for Chinese stocks will be the leadership change due next year, when both President Hu Jintao and Premiere Wen Jiabao will step aside.
"This hasn't happened in almost a decade in China. I think next year, it's the equivalent of an election year in the U.S., which traditionally is very positive for markets. I think that we're going to see a re-invigorated Chinese investor next year," Boesky said.
Investors have been worried that a worsening debt crisis in Europe - China's largest export market - would seriously harm the country's economy. But Boesky said he was confident China could weather the storm.
"China's sitting on a triple surplus right now, we have fiscal surplus, trade surplus, a foreign exchange surplus. China's got huge tools to weather a global recession. Even better tools than they had in 2008," he said.