‘Buying Opportunities’

Share-price surges have not been supported by company fundamentals in pockets of the markets over the last few months, forcing investors to be more selective, Ruan said. The fund managers and Deutsche Bank’s Sanchez also note global funds are still underweight China.

Zeng said Greenwoods remains positive about Chinese equities, expecting more interest-rate and reserve-ratio cuts within the next few months, which will reduce companies’ funding costs further.

It is focusing on industries such as consumer, life insurance, health care and telecommunications where earnings are more robust even in a downturn. Valuation of Chinese stocks listed outside of the country remain “compelling,” Zeng added.

“If H-shares and red chips continue declining, their valuations will be lower and offer good buying opportunities for the long-term for fundamental investors like us,” George Jiang, Greenwoods founder and chief investment officer, said in an e-mail.

H-shares are China-incorporated companies listed in Hong Kong. Red chips are Chinese companies incorporated outside of the country and listed in Hong Kong.