Five of the Best: Chinese consumer names to grow through the crisis

Asian markets as a whole will not begin to outperform until the European debt crisis is resolved, but consumer stocks in China will serve investors well, according to JO Hambro Capital Management's Paul Wimborne.

Wimborne, who joined JOHCM earlier this year from Barings with his colleague James Syme, warned the continued risk aversion is a negative for emerging markets and although many EM countries are coming to the end of tightening monetary policy, issues in the developed world are continuing to have a knock-on effect.

"Things are looking good in the medium term relative to the developed world, but in the short term we need to get to the end of the tightening cycle, particularly in China and India. The sovereign debt crisis will be very difficult for risk assets like emerging markets to perform, we need to see some resolutions before they can really do well."

Syme and Wimborne launched the Global Emerging Markets Opportunities fund on 30 June just ahead of the market falls seen in the summer, prompted by investors' concerns on sovereign debt.

However, Wimborne said the declines present valuation opportunities, particularly in the consumer staples sector. "This is an area where growth is still strong as China aims to rebalance its economy and low-skilled workers experience high wage increases.

"We are not looking at cars or luxury items but things people in the West take for granted, such as beverages, shoes, nappies and supermarkets."

Here he lists his top five consumer stocks:

1. Sun Art Retail, a supermarket company, recently floated on the stock exchange. Wimborne said: "There has been a rapid increase in the number of supermarkets across China, and this company is benefitting from rising consumption levels as modern supermarket formats take a larger share of sales."

2. China Mengnui Dairy produces milk and milk-related products. "Lower end consumers are using milk more and more and this firm is benefitting from the increased sales," said the manager.

3. Golden Eagle is a department store company which Wimborne said rents spaces to retailers and takes a percentage of their sales.

4. Hengan International sells products such as nappies and tissues, in high demand in China. "There is a much higher penetration level of the Chinese population using nappies for the first time due to the affordability levels," said Wimborne.

5. Baidu is the China's answer to Google, the internet search engine. Wimborne explained: "This is taking advantage of the long-term secular trends such as consumption, but also rising internet penetration."