THE manager of the £2.7 billion Scottish Mortgage Investment Trust has taken issue with the "disdain" shown by stock market players to Chinese equities in recent times.
James Anderson has also criticised the "extreme impatience" of some investors with regard to "even the most modest and temporary halt in earnings gratification" from technology companies on the west coast of the US, citing the rise and "dramatic fall" in Apple's share price as an example.
He says, despite the fall in Apple's stock market value, it is hard to see that the technology company's future prospects have changed substantively.
Mr Anderson makes his comments in his managers' review in Scottish Mortgage's newly published annual report.
Scottish Mortgage, which has tens of thousands of private investors, announced earlier this month that it had trailed its benchmark index in the 12 months to March 31 with an 11.6% rise in net asset value per share, but remained ahead over 10 years. Its benchmark, the FTSE All-World Index in sterling terms, rose 13.8% in the year to March.
Over the 10 years to March, Scottish Mortgage achieved a total return on net asset value, including capital returns and dividends, of 270%. Its benchmark's return was 174% over this period.
In his review, Mr Anderson says of China: "It is on this topic that we find ourselves most out of sympathy with current market sentiment. The disdain shown to Chinese equities, wherever they may be listed, is but part of a sustained and continuing antipathy towards the stocks of all the major emerging markets. Brazil, Russia and India have been similarly unpopular.
"This is an extraordinary contrast with the mood five years ago when the BRIC countries were perceived to be the saviours of the global economy. Whilst we share some disillusion with the current progress of Brazil, India and Russia, we have long believed that China is in a class apart." He adds: "This conviction has grown rather than shrunk over the last year.
"We cannot expect China to grow at 10% per annum as it has in the past. We do not want it to do so with the dramatic export surpluses of that era. The current trend of 7% growth and burgeoning import demand contribute far more to the health of the global economy than the unbalanced and immature boom of the past."
Mr Anderson highlights particular excitement about the opportunities surrounding the Chinese internet,
Chinese online search engine Baidu is among Scottish Mortgage's largest holdings.
Mr Anderson reiterates his belief in Baidu, even though it was a significant drag on Scottish Mortgage's performance in the year to March.
He has been unimpressed by stock market players' negative reaction to heavy investment by Baidu in mobile platforms.
He says: "It has been characteristic of the last year that equity markets are deeply intolerant of any investment spending by companies that crimp immediate profit growth.
"We find this both remarkably short term even by recent standards and deeply disturbing in its implications for corporate behaviour and the global economy."
Scottish Mortgage deputy manager Tom Slater highlights opportunities to develop knowledge of potential technology winners on the West Coast of America at an earlier stage.
He spent last autumn on the west coast, visiting existing Scottish Mortgage holdings, and meeting early-stage companies.
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