By Jeffrey Hodgson
HONG KONG (Reuters) - China's stock market rally, which has pushed indexes to record highs, may be only the start of a multi-year bull-run powered by profit growth and the rising yuan, Atlantis Investment Management's top China fund manager said on Wednesday.
Yang Liu, chairwoman of Atlantis's Hong Kong unit, said China's domestic stock market is likely to rise more than 10 percent by year-end with the Shanghai Composite Index .SSEC hitting 6,000.
In the longer term, investors will profit most by holding financial, property, health care and resource stocks, while textile firms and automakers should be approached with caution, she said at the Reuters China Century Summit.
"(Yuan appreciation) is the long-term catalyst for China, a similar situation to that of Japan 30 years ago. Non-China investment in these assets has gains from both currency and capital gains. This is something very substantial," she said at the summit, held at the Reuters office in Hong Kong.
"This bull market has only run for three years for China, but you look at the other markets, they've had at least a 10 or 20 year bull market."
For the nearer term, the Hong Kong-based manager said the China Enterprises index of H shares .HSCE, or Hong Kong-listed shares in mainland companies, was likely to challenge the 20,000 level next year.
The H-share index hit an intraday record of 14,606.21 on Wednesday and would need to rise another 37 percent to reach 20,000.
But at that level stocks would only be trading at about 15 or 16 times 2008 earnings, which "does not look demanding given the China fundamentals", she said. Continued...
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