KEY POINTS:
With about 300 million people shifting from China's rural hinterland to its rapidly expanding cities each year, the backers of a new emerging markets real estate fund believe that country's breathtaking economic growth is unlikely to be derailed by the credit crunch.
Wellington based boutique funds manager Kinloch yesterday launched its Emerging Markets Property Securities Fund, a New Zealand PIE compliant fund that will invest in listed property securities across the developing world, but mostly in Asia.
The fund's investment manager is ASX-listed Asian real estate specialist MacarthurCook, whose managing director and chief investment officer Craig Dunstan said that for the next 10 or 15 years "the best investment returns in the world are actually going to come out of Asia and emerging markets, and the US's day in the sun is certainly over".
Latest post credit crunch IMF forecasts suggest GDP growth across emerging markets of 6.7 per cent this year and 6.6 per cent next year against 1.3 per cent per annum across developed economies, and MacarthurCook points out there is a high correlation between GDP growth and real estate and property values.
"From a macro economic point of view the fundamentals are overwhelming," said Dunstan.
The 300 million people relocating from rural China to its cities were part of mass urbanisation occurring in many Asian countries, including India and Vietnam, that was driving demand for housing, factories, offices and shopping malls.
While estimates of economic growth in China and other developing economies had been trimmed because of the credit crunch, MacarthurCook real estate securities manager Roberto Versace believed internal demand from those countries would keep growth at relatively high levels.
Versace and Kinloch managing director Neville Todd pointed toward the recent contracts for coal and steel struck by Chinese companies. Their willingness to accept large price increases for raw materials suggested they expected robust domestic demand.
Kinloch's Emerging Markets Property Securities Fund will be benchmarked against the S&P Citigroup Emerging Property Index.
Versace said the fund will be overweight in its exposure to China relative to the benchmark index's 40 per cent weighting.
Its other exposures will be mainly in Asia, Poland and South Africa.
