The negative effects of China’s economic slowdown and the pullback in its stock market are overstated, according to one emerging markets portfolio manager. ‘I’m sure most people would think that China hugely underperformed the rest of the world. In fact that’s not true at all,’ said Anthony Cragg, portfolio manager at Wells Fargo Advantage Funds. ‘It’s been one of the best performing markets, even now, even after this correction.’ Cragg pointed out that as of Monday, the Shanghai Composite Index was down 8% year to date, compared to the Dow Industrial’s drop of 10%. Cragg said China’s economic slowdown was inevitable and is the new reality. Cragg said the slowdown in China, along with weak commodities prices, argues for selectivity in emerging market stock selection. ‘To lump all emerging markets together never really made much sense and particularly doesn’t now given oil and commodity prices at this level,’ said Cragg. He added that low commodity prices are negative for commodity producing countries like Russia and Brazil, but beneficial to countries that are net importers, such as China and India. For that reason, Cragg prefers investing in Asia over other emerging markets.
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