BlackRock goes for industrial counters
The company's top China fund manager also looks for 'intrinsic value' in the health-care sector but rules out buying into themes
BlackRock is betting on the mainland's industrial and health-care sectors, where the world's biggest asset manager expects fast-growing demand.
Jing Ning, BlackRock's top China fund manager, told the South China Morning Post in an exclusive interview that the firm had sold some mainland property and bank stocks earlier this year and was now investing more money in firms in the industrial and health-care sectors.
Having beaten the MSCI China Index since 2009, Beijing-born Ning, widely considered one of the most powerful fund managers in the country given the size of the assets under her management, said she was not a "theme chaser". She preferred to examine "intrinsic value" when making her choices among thousands of Chinese stocks.
The BlackRock fund under Ning's management has reached US$1.46 billion and is mainly invested in Hong Kong-listed mainland firms.
The fund has outperformed the benchmark in the first two months of this year.
"I never think valuation is a fair measure. And I never buy into a theme, because it's risky to hear a theme and buy something that looks like a play," Ning said.
Indicators of "intrinsic value" vary in different sectors. For example, physical assets and replacement cost of capacity were key for industrial firms, while merger and acquisition prices could offer a reference for consumer and internet firms, she said.
Now, industry leaders in industrial sectors such as steel, cement and chemical production, offered good buying opportunities, Ning said.
"We are getting closer to an inflection point [beyond which] demand growth will be higher than supply growth," she said.
Health care would have long-term demand from the ageing population, and the overall valuation for the sector was cheaper than for other thematic plays, such as the consumer sector, Ning said.
Beijing is keen to reform the health-care system, a major challenge to social stability in the past decade. The reform offers huge potential for growth of related businesses.
Earlier this week, the Post reported that Triplex Biosciences, a biotechnology and medical firm, aimed to raise US$150 million through a Hong Kong listing this month. Later this year, Chongqing Medicines also plans to go public in Hong Kong to raise about US$400 million.
Many investors have stayed away from the property sectors, mainly because local governments have been ordered to curb fast-rising property prices.
Ning said she sold some property stocks early this year after last year's rally. She is cautious on this sector, saying the golden growth period for developers "is over", as they can no longer easily secure land below the market price.
She does not like insurance firms either, saying their products cannot compete with wealth management products, which offer returns of at least 5 per cent.
Ning also sold banks after their price-book value ratio jumped to about 1.3 times in January. But she said she would consider buying the sector if the ratio fell below one.
The biggest risk in the Chinese economy now was whether it would have a meaningful demand recovery, especially in the property market, she said.
Without domestic demand, "there will not be any investment as well".