While China’s industry and real estate market are in better shape than many Western commentators have suggested, the country’s real lame ducks are exporters that depend on overseas growth, according to UK's PSigma Asset Management.

Jing Sun, manager of the company’s global equity fund, sees 2011 as a typical example of the maxim “if developed economies sneeze, developing ones catch the flu”. Despite superior growth, the US S&P 500 index was flat over the year while equity indices in all the BRIC countries saw double-digit falls.

For this reason, Sun recommends avoiding exporters based in China and is instead interested in firms that are set to benefit from the long-term economic growth and positive demographics in the country and other developing markets. He mentions Tencent Holdings, China’s largest internet service portal, and China Mobile, the mobile phone network, as well as multi-nationals such as Daimler and Unilever.

Crucial to this analysis is that PSigma does not believe that the eurozone will erupt and cause a global crisis of the kind seen when Lehman collapsed in 2008. The Armageddon-scenario has been on everyone’s lips for so long that policymakers in Europe have bought themselves enough time to deal with the region’s sovereign debt problems, according to Sun.

Sun also thinks that China will manage to achieve a fairly soft landing despite sluggish global growth in 2012. That will boost global equity markets, but he expects the Chinese stock markets to stay virtually unchanged until investors know where the new political leaders and, crucially, interest rates are heading. The muddling through-scenario for the world economy will stop Chinese policy makers from doing anything dramatic, he says.

The Chinese market is one of the most policy-obsessed in the world, according to Sun who points out that no one yet knows what the once-in-a-decade leadership change late in 2012 will mean for the country, although most indications point to continuation and caution.

Separately, PSigma has re-launched its discretionary investment management service with lower fees as a preparation for the UK regulator’s Retail Distribution Review that will kick in at the start of next year. The service will also change its name from wealth management solutions to managed portfolio service.