By Sarah Marsh

FRANKFURT (Reuters) - The steep drop in China's stock market has created attractive buying opportunities in property, while Asian financials benefit from being little exposed to the credit crisis, Schroder Investment Management said

Schroders Asia specialist expert David MacKenzie told Reuters that the firm, which has a regional Asian equities portfolio worth $9 billion (5 billion pounds), was closing its underweight position in Chinese equities worth $2.7 billion.

"We are starting to see some very attractive valuations," said Mackenzie in an interview this week, adding that the market had been pushed downwards as risk aversion increased and hedge funds looking to deleverage were forced to sell.

The benchmark Shanghai Composite Index .SSEC has fallen by nearly two thirds in the past year and China last week unveiled a rescue package including scrapping its stamp tax on stock purchases and enlisting a government-controlled agency to buy shares of listed companies.

"Among the banks and financial institutions in the region, some have had exposure to Fannie (Mae) and Freddie (Mac), to some Lehman bonds etc., but that does not represent a significant portion of their assets," said MacKenzie, a member of Schroders' Asian equities portfolio management team.

"Macroeconomically, Asian countries are performing quite well and so loan growth continues to be relatively strong."

Schroders is overweight in Asian financials, and one of its top holdings is Taiwan's Cathay Financial (2882.TW: Quote, Profile, Research), which had exposure to failed investment bank Lehman Brothers (LEHMQ.PK: Quote, Profile, Research) worth T$1.05 billion, compared with a total investment portfolio of $62.5 billion. Shares in Cathay Financial have fallen 35.6 percent in the past year.

The main downside risk of the credit crisis to China would be that exports dip due to slower U.S. consumption, said MacKenzie.  Continued...