China once again looks cheap following the country's recent political scandals, said M&G's Matthew Vaight and luxury brands are looking particularly attractive.
The recent probe into Chinese politician Bo Xilai alongside other investigations relating to public sector corruption were part of the reasons for a short-term valuation dip in the consumption sector, said Vaight who runs the €900 million M&G Global Emerging Markets fund.
The Euro Stars A-rated manager said he expects a rebound in this sector over the coming months, unlike other managers who have cited the corruption crackdown as having an irreversible downwards effect on China's luxury boom.
'China is looking a lot more interesting again and of course it takes time before we take stock specific investment decisions,' Vaight told investors at Citywire's Berlin event last week.
'But the general trend is that we expect to have larger exposure towards China from now.'
The fund is currently underweight China compared to its benchmark but Vaight said he expects to go into an overweight position next year.
He added that stock selection into Chinese consumer demand remains predominantly in western companies, like the Swiss-based Richemont, as the market for local brands remains under developed.
He is adding more stocks exposed to BRIC economies on a valuation basis with a particular eye for the consumption sector.
'We've been doing quite a lot of work with luxury and retail companies like Richemont where on valuation we've seen quite a good pull back,'
'Consumers have become the headline story. They see exaggerated moves when things are doing well and they also get over-discounted when things are bad.'
His fund's top holdings include the Finnish paint company Tikkurila and the Taiwanese electronics manufacturer Delta Electronics.
The M&G Global Emerging Markets fund returned 34.4% in the three years to the end of October, in line with its benchmark index the MSCI EM TR EUR index which rose 34.5% in the same period.