Consumer staples and services, health care, software and auto stocks are Henderson Global Investors' top Chinese stock picks for 2016 — but don't get your hopes up for a hearty dividend.
Charlie Awdry, China portfolio manager at the asset management company, told CNBC Wednesday that investors should take a discriminating approach to investing in the benchmark Shanghai Composite, the Hong Kong Hang Seng or U.S.-listed American Deposit Receipts (ADRs) for Chinese stocks. (ADRs are issued by U.S. banks and allow investors to buy shares in foreign companies and receive dividends and capital gains in U.S. dollars.)
"I think your broad strategy in China, whether you are in Shanghai, Hong Kong, or U.S.-listed ADRs is that you want to be in cash-generating companies. You don't want companies with debt; you want companies with high margins and decent management. That kind of leads you towards software, where it is of reasonable value; it also leads you to consumer services and also to health care stocks as well," Awdry said.