Ma says that the importance of a power transition due in October has been underestimated, as
local governments and businesses have been delaying their expenditure until the new administration takes over. This means the stage is set for a quick take-off in markets once the new administration is in place. With the next five-year plan prioritising the stimulation of domestic demand, the country may be ready to boom again.
However, misleading media reports have led many investors to shun the region, and Ma has moved to address the most widely circulated myths.
China is facing a hard landing
Ma says this completely mischaracterises what is happening.
"I would say what we’re seeing is one landing but with two faces," he explained. "The cyclical landing is hard, but the secular landing is soft."
Ma says he has managed to outperform his peers and MSCI China benchmark since launch by avoiding the cyclical areas of the economy such as banks, commodities and energy stocks and sticking with companies that play the trends towards consumerisation.
He holds 10 per cent of his fund in internet stocks and is overweight consumer discretionaries and consumer staples.
Performance of fund vs sector and index since launch
Source: FE Analytics
China is facing a housing bubble
Hedge fund manager Hugh Hendry has warned of a bubble in the Chinese construction industry, showing rows of empty apartment blocks to the world’s media and saying "wise men don’t invest in over-capacity".
Other commentators have even compared China to Spain and suggested it faces a similar fate.
Ma says that while there are a handful of ghost towns in the country, they are insignificant to the overall housing market.
He explains that towns such as Ordos were built for specific industries – in this case mining – and they cannot be taken as indicative of the general state of the market.
"We have seen bankruptcy in some developers in those regions, and there might be other cases, but those cities are a tiny minority of the two hundred cities in China."
In Shanghai, the Chinese government has taken steps to cool down the market, banning locals from buying more than two properties in the city and from buying property outside it.
Ma says that this has still not dampened demand, showing that the housing market is in no danger of collapse.
China is losing out to sources of cheaper labour
While Ma agrees that China is losing blue-collar jobs to adjacent Asian countries with lower wage demands, he says that its high number of graduates are now providing a pool of cheap white-collar labour.
"In 2003, 2 million people graduated in China, now it is 6 million that graduate every year. This means that China has a lot of cheap skilled labour to offer to multi-nationals in sectors such as IT."
The luxury goods market is in trouble
A surprise profit warning from Burberry earlier this month saw the company’s shares drop over 25 per cent.
Performance of stock over 1-yr
Source: FE Analytics
Burberry has been expanding aggressively into China, and many commentators suggest the contraction is a sign that the market for luxury goods in the country is waning.
Some of these claimed that conspicuous consumption was becoming dangerous, with the economy turning and high-profile figures being arrested on corruption charges.
Ma says that while this may be true for the higher net-worth customers, the rising wealth of the middle class will more than make up for this.
"There may be periods when luxury goods consumption drops slightly, but the long-term trend is clear. When the middle class can afford Burberry, this will be very positive for the stock," he finished.