“As far as the fundamentals are concerned, we are actually quite confident,” Bao, a Hong Kong-based money manager at Fidelity, which oversees more than $2 trillion globally, said in a telephone interview. “We are fully invested.”

Bao is echoing the bullish call from Goldman Sachs, saying the four-week rout that wiped out almost $4 trillion in market valuation has limited impact on earnings and economic growth. Government efforts to stabilize the market will keep the rout from spilling over to the broader financial system, Bao said.

The Shanghai Composite Index rallied 4.5 percent at the close on Friday, adding to Thursday’s 5.8 percent surge, after regulators this week banned major stockholders from selling stakes in listed companies and allowed banks to roll over loans backed by shares. The benchmark is still down 25 percent since June 12 as leveraged investors unwound bets. More than 1,300 companies remained halted on mainland exchanges on Friday, locking sellers out of 47 percent of the market.

Goldman Sachs

In a sign that foreign investors expect that the worst may already be over, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the largest U.S. exchange fund tracking the mainland shares, advanced a record 20 percent Thursday in New York. The ETF added another 5.9 percent at 1:54 p.m. Friday.

Bao’s $2 billion Fidelity China Region Fund, the largest in the U.S. that invests in the country’s stocks, has returned 8.2 percent annually over the past five years, beating 90 percent of its competitors, according to data compiled by Bloomberg. His colleague Jing Ning oversees $5.5 billion Luxembourg-domiciled China Focus Fund, the biggest outside China. Both buy shares listed in Hong Kong, the U.S. and the mainland.

Goldman Sachs strategist Kinger Lau predicts that the large-cap CSI 300 Index will rally 27 percent from Tuesday’s close over the next 12 months as government support measures boost investor confidence and monetary easing spurs economic growth. Leveraged positions aren’t big enough to trigger a market collapse, Lau said.

‘A Sideshow’

Before the stock market rout deepened this month, China’s economy had shown signs of picking up from the slowest growth since 1990. A government report showed Thursday that consumer prices rose faster than economists forecast in June, suggesting a stabilization in demand.

Olivier Blanchard, the chief economist at the International Monetary Fund, said the same day that China’s stock-market slump is “very much a sideshow” that “doesn’t reflect on the fundamentals” of its economy.

“We are confident that in the second half of the year we are going to see some recovery in the economy, which is not priced into the market,” said Bao. That will benefit industrial companies, which have been hit the hardest, while Hong Kong- listed small and medium-sized firms also look attractive, he said.

The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong is trading at 8.3 times trailing 12 month earnings, the cheapest among the world’s major benchmarks, after declining 23 percent since a high in May.

Government Support

Chinese regulators have introduced support measures almost daily for more than a week, including suspending initial public offerings and restricting short selling. Policy makers have also made loans available to securities firms to buy shares.

There is a decent chance of “another leg down” for stocks within the next few months when the government starts to withdraw its support in terms of liquidity, David Cui, Bank of America Corp.’s head of China equity strategy, said on a conference call on Friday. Unless the government keeps pushing the market higher, selling pressure will probably “stay relentless” because of leverage, he said.

While the intervention has drawn criticism from some investors about creating confusion, Bao said it’s encouraging to see a government that is “very engaged.”

“You can debate all day long should they have done this or that, but as an equity investor, it’s good to have the government on your side,” he said.