- Interview with Citi Fund Management Business Director of China Peng Zhenyu, China Fund (Hong Kong) marketing director Chen Yida Reproduction of global market volatility in recent days, A shares fell more in a row. Tightening the face of rapid warming in Europe is expected and the external debt crisis turmoil, investor confidence in the Chinese economy and the stock market is still? Whether the global stock markets Come to a new stage inflection point? With these questions, the Shanghai Securities News recently interviewed Citigroup Fund Management Co., Ltd. Peng Zhenyu, director of China operations and China Fund (Hong Kong) Company marketing director Chen Yida. Last week, Citigroup And Huaxia Fund (Hong Kong) in Hong Kong high-profile co-launched the "China Select Fund", to invest in mainland China, A, B shares and overseas listed Chinese concept of the company. This is the United States so far this year launched a second fund offshore only China Concept Fund. Citi earlier this year launched the "situation in China Fund" at the end of October has achieved 21.8% return. 1 will be returned to a neutral monetary policy next year Funds Weekly: Fed restart quantitative easing, the market doubts about the U.S. economic recovery, regeneration, and you think the U.S. economy is second bottom of the extent of risk? Peng Zhenyu: The recent turnaround in U.S. consumption data, slowing U.S. economic recovery concerns, if deflation and employment to the good, the U.S. economy may be increased slightly. Future risk mainly from three aspects: first, the Bush Government's tax cuts expire, may affect the GDP growth in 2011, the United States. Citigroup forecast U.S. GDP growth of 2.2%, while if all the tax cuts expire, Congress will not be able to find a compromise the White House to support construction Yee, growth can be reduced up to 50%. Second, to reduce the deficit may affect the long-term confidence in the economy and stock market valuation. Third, corporate profits are likely to begin in mid-2011 under pressure, and then have some negative impact on the stock market Ring. Funds Weekly: The world economy is facing the biggest risks lie? Peng Zhenyu: trade protectionism is still the world economy is facing serious threats. We are deeply worried that this problem may be strengthened in the next couple of years, because most Americans believe the United States the loss of free trade Many employment opportunities. Funds Weekly: China's economy is currently the biggest problems? Inflation? Or unstable external environment? Chen Yida: China's economic growth in recent years has been more dependent on exports and fixed asset investment, the instability of the external environment of China's economic development has become an uncertain factor. Policy makers understand the crux of the problem, so In the promotion of economic structural changes have been: investment in fixed assets from the leading export and domestic consumption led into. Currently, inflation is the most policy-makers need to focus on a potential risk factor. We believe that, in order to balance economic development, policy-makers will be implemented in the coming year a more relaxed fiscal policy and a more neutral monetary policy Policy. Growth, economic growth target will be converted from the weight of heavy, future growth may be lower than in the past, but the endogenous growth will make economic growth more stable. Funds Weekly: China's outlook for interest rates? How expectations for RMB? Chen Yida: We believe that China's monetary policy next year, will return to neutral by the relaxed, interest rates rise further space. As for the RMB, we expect in the coming year is likely to remain for some time about 3-5% The gradual appreciation. Funds Weekly: "Twelve Five" plan will affect the Chinese economy to the next step? Which industries will bring opportunities? Chen Yida: We believe that the "Twelfth Five" plan will lead the economic development of exports and fixed asset investment from leading into a consumer-led. We believe that the future consumption, urbanization, and emerging industry-related sectors will benefit. 2 Ireland crisis will not last long Funds Weekly: Fed's second quantitative easing the impact on the Chinese stock market? Positive or negative, or both? Chen Yida: quantitative easing, the Fed made the second to increase market liquidity, capital poured into the relatively strong economic growth in emerging markets, including China. If the funds into the real economy, capital can bring to enhance production efficiency. If Money chasing assets, the market may become more volatile, will bring more inflation. Funds Weekly: U.S. stocks last week for nearly two months to a rare drop, this means that the wave was temporarily increased to a paragraph? The main reason to adjust that? Adjusted for how long? Chen Yida: Citibank's latest research shows that two external factors and profit taking caused U.S. stocks fell. Citigroup believes that Ireland will be faster to solve the debt crisis, while China's efforts to moderate inflation, the future trend of U.S. stocks more influence the development of the U.S. economic recovery. Currently, the U.S. stock market valuations are reasonable, relatively strong corporate earnings, balance sheets are improving, the market downside is limited. Ample liquidity, but the real good investment opportunities are few. Current stock class Assets are not clear bubble, but the bond market risks. Therefore, stock investors should avoid some of the assets of the company responsible for the higher, such as finance and public utilities. Such volatility in the credit market will be the first to be affected. Funds Weekly: How to Understand A recent slump in shares? How will the evolution of the market outlook? It will remain relatively weak during the year? Chen Yida: A shares recently fell in October mainly due to higher than expected inflation, the market will worry policy makers out of a series of fiscal policy to combat inflation, the increased uncertainties in the market, investor sentiment appears Greater volatility. We believe that good macroeconomic fundamentals, the expected strong growth momentum in corporate earnings next year, with valuations still attractive, the market outlook outlook remained positive. We believe the market is full of structural opportunities, we do not emphasis on stock selection Select City. 3 optimistic about the education and health care stocks Funds Weekly: China's stock market prospects for some of the major industries to see? What are stock market-related opportunities? Chen Yida: on the financial sector, China's financial stock price already reflected a lot of negative factors, but still Need to wait for better market opportunities. In real estate, the purchase of that is very likely that volume remains in the doldrums, our view is more neutral. In the consumer sector, as mentioned above, China's economy is in a phase of structural change, from exports and fixed asset investment to become the leading consumer-driven. In this process, we believe that education, financial services , Health care, gaming and other areas of opportunity will be greater. Funds Weekly: the interest rate gradually in the context of recovery, whether the commodity sector should be optimistic about? What species is particularly attractive? Chen Yida: the interest rate gradually in the context of recovery, we have reservations about commodities stocks. We have pricing for those commodities in China, such as rare earths, molybdenum, etc., are more optimistic about the long-term development. Funds Weekly: Why choose this time to introduce China Select Fund? What areas of your most promising? Peng Zhenyu: China Select Fund, the biggest bright spot is the first time, especially for overseas retail investors in Hong Kong and Macau to mainland China through local fund managers to invest in mainland stocks. Current investment in the Asia-Pacific region Were very keen on the Chinese concept, but usually only by overseas fund managers invest in mainland China. The Citigroup Foundation and the China Fund, strong cooperation with Citigroup's international brands and local Chinese professionals to jointly create China Select fund for overseas investors with a great opportunity to invest in China. Funds Weekly: The fund will invest A shares directly? Peng Zhenyu: China Select Fund's investment objective by investing in China-related companies to provide investors with long-term capital appreciation. The Fund will also invest in the mainland of China-listed A shares or B shares of the company, and in the sea The concept of foreign-listed Chinese companies, including Hong Kong, New York, Singapore, Taipei, the specific gravity will be the form of fund managers and market dynamics, as the macroeconomic flexible configuration. Funds Weekly: Do you think the next 12 months, the largest A share investment opportunities lie? Peng Zhenyu: second Five-Year Plan, China will speed up the process of mainland cities, middle income people will increase; addition, due to the uncertainty of the external economic environment, the country has economic restructuring policies. In this Background, we are optimistic about the resulting structural opportunities, especially by domestic demand, urbanization, industry, the theme of emerging industries, such as education, health care, financial services, rail, fiber optic network and other industries.

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