Fidelity on the hunt for under-performing Chinese banking stocks, while avoiding pharmas

Fidelity International, the London-headquartered global money manager, is eyeing up under-performing Chinese banking stocks as one of its major bets in the second half of year, according to one of its senior portfolio managers, but plans to refrain from buying currently strong drug makers.

While big state-owned lenders, including Industrial and Commercial Bank of China and China Construction Bank, have retreated at least 5 per cent this year amid liquidity tightening and corporate bond defaults, the risk reward is increasingly turning attractive as stock prices are below book values and most negative factors have already been priced in, Lynda Zhou told a briefing in Shanghai on Wednesday.

Fidelity is one of Hong Kong’s Mandatory Provident Fund scheme providers and has about US$411 billion in assets under management.

Zhangzhou Pientzehuang Pharmaceutical, for instance, has been viewed recently as a stock to avoid, along with other health care companies for now, because of recent excessive sector gains.

“Banks are being beaten down as they are considered as highly exposed to recent worsening liquidity and defaults in corporate bond payments,” Zhou said.