Templeton Asset Management’s Mark Mobius says that he’s still high on Chinese stocks, but that — as in any market — good stock-picking and a disciplined approach are key to making money in that part of the world.

“I have heard queries from baffled investors about past underperformance of the Chinese stock market despite the long-term positive outlook for China,” Mobius writes on his blog. “One key factor that I would like to stress is that, as equity investors, we look at individual stocks rather than the market as a whole. There is quite a difference between what’s happening in the domestic Chinese A share market and the H share market in Hong Kong, which is where we are buying and hold stocks.”

Mobius says that in the “A share” market, investment is generally closed to foreigners; the Chinese renminbi isn’t convertible; and capital cost structure and a systematic shortage of equity supplies exists. All of that leads to higher volatility, he says.

A rush of initial public offerinigs last year in the A market also shifted money from listed stocks to higher-valued IPO stocks, he adds. “We continue to focus on the H shares and the so-called ‘red-chips’ listed in Hong Kong, which is where we finding the most interesting opportunities,” Mobius writes. “Most importantly, markets go through cycles, and investments, and the Chinese market are no exception. This underscores the importance of patience and our view that any serious investor should have at least a five-year investment horizon.”

Mobius also talks about several problems facing China, including the movement of some Chinese manufacturing operations to lower-cost countries like Vietnam, which could lead to higher employment and labor unrest. But he also discusses the Chinese government’s new Five-Year Plan, which is designed to address those issues, and continue to shift control of the economy from the government to the private sector.