FUNDVIEW-Sentinel aligning for China-led Asia surge

NEW YORK, July 8 (Reuters) - Investors will profit from consumer oriented Chinese stocks as the world's third largest economy boosts consumer spending and aligns itself as the leader of resurgent Asia economies, according to Kate Schapiro, a fund manager at Sentinel Investment in San Francisco.

China, which some analysts say may soon overtake Japan as the leading regional economy, is attempting to reduce its reliance on exports in a bid to shield the country from the collapse of global trade during the recession.

Some investors say the Chinese, who are spending around $586 billion to stimulate their economy, have been quick to put money to work while the United States and especially Europe have lagged behind as banks remain reluctant to lend and policy has been slow in the making.

"Going back to last fall we started to move more money into Asia," Schapiro said in a recent interview. Her $139 million international equity fund SWRLX.O is overweight in the region, with 10 percent of its assets in China and Hong Kong.

The fund is up 4.7 percent from the start of the year as of early July, according to fund tracker Morningstar Inc, compared to an increase of 1.3 percent in its benchmark MSCI EAFE Index .EAFE.

"We tried to focus on more domestic oriented companies that have been less exposed to the export side," said Schapiro, who has been reducing her exposure to Europe, partly because of what she sees as a slower response in dealing with the recession.

Schapiro owns China Life Insurance Co Ltd (2628.HK), the world's biggest life insurer by market value, and China Mobil Ltd (0941.HK), the world's biggest mobile phone carrier by users.

She also owns shares of Industrial and Commercial Bank of China Ltd (1398.HK), the world's largest bank by market value and is confident that centrally directed lending as part of China's stimulus will not lead to build up of bad debt from injudicious loans, as some investors have warned.

Also among Schapiro's holdings are Internet company Tencent Holdings Ltd (0700.HK), which runs China's largest online messaging community, "QQ", and Want Want China Holdings Ltd (0151.HK), a food and beverage company and one of China's biggest snack makers.

"The Asia story to me is really keyed out of China." said Schapiro. "It's going to have a huge influence on that region, which to my mind is positive for the region as a whole."

Hong Kong's benchmark Hang Seng Index .HSI has rallied 57 percent since early March as many emerging equity markets outperformed Western counterparts during the spring surge in global asset prices. Many investors have been taking profits after the run-up and are waiting for a pull-back to begin buying again.

"After the moves we've had this year I would expect things to kind of drift down," said Schapiro. "And to me that is an opportunity. It also means I don't have to be in a rush to buy."

Although some investors have made much of Chinese infrastructure companies as potential beneficiaries of the country's stimulus spending, Schapiro doubts the commitment that many of the managers of these companies have toward growing shareholder value.

"We are very interested in the infrastructure side, which would be the trains, the rail stocks, (and) airports, but it doesn't fit our management and quality criteria," said Schapiro. "We are less likely to own some of those stocks. That doesn't mean we don't think they are interesting."

Despite the risks associated with investing in China, such as the moral hazard of managers not looking out for shareholder interest or a political regime able to intervene in business to suit its policy objectives, the rewards of a growing economy of more than 1.3 billion people is winning over investors.

"The twentieth century was about the re-balancing from Europe to the United States and North America, without a doubt," says Schapiro, who said U.S. domination of the global economy probably peaked in 2001. "This century is going to be about the re-balancing from the United States and North America to Asia." (Editing by Padraic Cassidy)