The top five best-performing funds of 2006 were those focused on China, and they delivered stellar returns with limited holdings, Bloomberg reports. In fact, they focused on financially oriented investments: banks, insurance firms and real estate.
The No. 1-performing fund was the JPMorgan JF China Fund, which rose 100%, followed by the Baring Hong Kong China Fund, up 95%, and the Fidelity China Focus Fund.
“People just ignored China, but as we moved into 2006, people had a wake-up call on how healthy the economy was,” said Lilian Co, manager of the Baring Hong Kong China Fund.
“Property and banks will continue to outperform because of the robust economic picture in China,” Co continued. “Domestic consumption and retailers will also do well. With economic growth 9% to 10% a year for the next few years, how could you be bearish?”
Certainly, prosperity is widening in China, with incomes rising 10% in the first nine months of 2006 and the number of millionaires increasing 6.7% in 2005 to 320,000. Meanwhile, residential property prices are double what they were in 2000.
The Morgan Stanley Capital International China Index rose 79% in 2006—beating the emerging-markets index. For the past four years, the Chinese economy has expanded 10% or more, and some economists foresee that continuing into 2007.