FUND VIEW-Ignis sees value in HK and China real estate

* Real estate firms in China and HK benefit from low rates

* Bullish on Chinese banks as earnings upgrades seen

* Spending power to fuel demand for consumer goods

LONDON, Aug 18 - A combination of low interest rates and resilient consumer spending in Asia are set to boost property firms in China and Hong Kong, a fund manager at Ignis Asset Management said. Diamond Lee, the manager of the 84 million pound Ignis Pacific Growth Fund, said consumer spending in Asia remains strong despite the financial crisis, with many investors looking to put their money into property to benefit from low lending rates.

"The story for Asia is a very good one for real estate because while Asia doesn't have any of the banking problems it does benefit from having globally low rates," he told Reuters in an interview.

"They more or less get a free ride out of the easy money conditions in the rest of the world."

The fund, which invests mainly in China and Hong Kong, holds Chinese property firms Yanlord Land, China Vanke Co and KWG Property Holding Ltd as well as Sun Hung Kai Properties, one of the biggest real estate firms in Hong Kong.

Lee said he prefers to invest in China and Hong Kong as the region has a good growth potential, and offers a much bigger marketplace than other Asian countries.

Property prices in China were up by an average of 10 to 15 percent in the first half of 2009, with banks boosting their real estate loans in response to Beijing's efforts to stimulate the economy.

The fund, which invests in equities in the Far East and the Pacific Basin excluding Japan, is up 11 percent in July, but underperformed the benchmark Lipper Asia Pacific excluding Japan sector which rose 11.9 percent while the MSCI Index of Asia Pacific outside Japan rose 12 percent in July.

In the six months to the end of July, the fund recorded a return of 27.9 percent, against a 37.1 percent return on the Lipper Asia Pacific excluding Japan benchmark.

Lee said the resilient spending power in Asia has also benefitted the consumer goods sector, with Chinese online gaming firm Perfect World and Chinese shoe distributor Belle among the firms he prefers.

Apart from China and Hong Kong, the fund invests in consumer goods like Indonesian instant-noodle giant Indofood while in India, Lee prefers state-run power equipment company Bharat Heavy Electricals Ltd and software firm Infosys Technologies.

BULLISH ON BANKS

Lee's fund is overweight on the banking sector in China, as he anticipates earnings upgrades for the country's largest lenders on the prospect of an interest rate hike in the country.

He said the higher rates would translate into bigger margins for the banks, and picks China Construction Bank and Industrial and Commercial Bank of China as among the top 10 holdings in the fund.

"As economies worldwide begin to recover there is less policy directed lending. There's going to be less liquidity out there so interest rates should be rising. That's really good for banks because they can lend at more profitable rates."