Samsung Asset Management Co, a unit of South Korea's biggest brokerage, likes consumer stocks in China because consumption is poised to explode as disposable income rises and shopping patterns change.

"The consumer sector will be the winner in the Chinese stock market," T.J. Um, who oversees $15 billion as Samsung Asset's chief investment officer of global investment, said in an interview at his office in Seoul on Thursday. "Domestic consumption will be the main factor to boost economic growth."

UBS AG predicted last month that China's stocks will enter a "bull rally" in the next three to six months as the government drafts details of the next five-year economic plan. Haitong Securities Co in August said investors should buy Chinese stocks on "near-term pull-backs".

China's benchmark CSI 300 Index of A shares, dropped 15 percent this year while the Hang Seng China Enterprises Index of H shares rose 0.4 percent. Samsung Asset prefers A shares to H shares because of valuations.

"Downside risk is more limited than any other emerging market," said Um, who likes consumer companies. "Valuation-wise, A shares are relatively low to their average."

The best-performing industries in the China index this year were healthcare and information technology. The worst sector was financial companies.

China's economy will grow 9.6 percent next year, topping the 1.5 percent projected for the eurozone, the International Monetary Fund forecasts.

Policy moves

Government policies focused on domestic consumption and a new generation more inclined to shop will boost spending, according to Um. "Historically, when a nation's gross domestic product per capita reaches the $3,000 mark, there is an explosion in consumption," said Um. "China reached that mark."

Retail and catering sales in China jumped 18.7 percent during the Oct 1 to Oct 7 holidays from a year earlier, Xinhua News Agency said on Friday.

Um also likes Indian stocks, as the economy is insulated from the rest of the world - particularly companies related to domestic consumption.

He expects emerging markets will benefit most from developed country central bank moves to stimulate their economy known as quantitative easing.

"If the global economy recovers due to quantitative easing, then people's risk appetite will rise," said Um. "Then, the risk appetite will go for more investment in equities. That will lead to more investment in the emerging markets."

In fixed income, Samsung Asset likes local-currency government and quasi-sovereign bonds and higher-rated corporate debt in emerging markets. "Currency appreciation and better liquidity will help investment in the notes," said Um.

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