The Franklin Templeton emerging markets group is selectively adding to its portfolio in China, picking investments in the consumer sector, executive chairman Mark Mobius told reporters on Thursday.
Mobius said that regardless of the slowdown in China's economic growth, to an expected 7.5 percent growth this year, the country would remain the group's key investment area.
"We continue to add to our China positions on a very selective basis, particularly in the consumer area," Mobius said.
He said the focus was on domestic-demand sensitive companies such as a firm that produces additives and nutrients, and a tea company that is opening retail stores across the country.
China currently accounts for 25.5 percent of his funds' total $50 billion of investment in emerging markets, followed by Thailand with 12.0 percent and India with 9.6 percent.
Emerging markets have taken battering in the past few months as speculation hotted up over when the U.S. Federal Reserve might begin reducing its equity-friendly $85 billion monthly bond-buying program.
But Mobius said there would be an upside as the Fed's tapering should lead to a strengthening in banks' balance sheets that would result in greater lending.
"We dispute the idea that the tapering will result in the reduction in the money supply," Mobius said.
But he warned that countries with weak balance of payments positions would be vulnerable if global liquidity dried up.
"Two countries we're just discussing might be affected -- again, this is a big question mark -- and those are Turkey and Peru," Mobius said.
Whereas the Indian rupee has weakened sharply to hit record lows due to a high current account deficit, Mobius said export-oriented Indian firms could benefit.