bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

A GROUP OF LEADING investment professionals have jointly launched a China fund despite the depressed sentiment surrounding stock markets worldwide.

The China Mantou Fund was launched last week by Pacific Sun Investment Management, a brainchild of managing director Andy Mantel.

'Other than China's entry to the World Trade Organisation which opens up opportunities in the market, the target stocks are lower now than 12 months ago, so it's a good time to launch this fund,' said Mr Mantel, whose nickname in Mandarin is 'mantou', meaning 'bread and butter'.

Stuart Leckie, director and chairman of the fund, said that because China's financial regulatory authorities were eager to popularise the stock market  among the vast mainland populace, Chinese stocks looked more attractive.

Last year, the mainland's financial system was given a boost with the establishment of a proper regulatory framework.

The creation of separate regulatory bodies for the financial industry's four main sectors - banks, securities and futures, insurance as well as trusts and investment - should bring legitimacy to the system.

The 'Gloom, Boom and Doom' report by Marc Faber said that the combination of a growing private sector and maturing capital markets would catapult China into the new millennium.

As mainland companies are encouraged to raise money in the capital market, investment opportunities begin to surface.

A recent report by Core-Pacific Yamaichi showed that the number of H-share companies planning to issue A shares in the mainland stock exchanges had increased.

The exceptionally high price-earnings ratios in both Shenzhen and Shanghai A-share markets have been an attraction. Apart from raising funds, companies also will see their per-share net asset value grow.

Some China analysts have suggested that even though the performance of H shares has failed to meet investors' expectations over time, the mainland's WTO accession in the first half of the year will have a profound influence on the H-share index.

To prepare for the event, the government has been restructuring or merging enterprises ahead of an expected influx of foreign competitors.

Cutting tariff rates and removing other trade barriers also will have a significant impact on H shares.

Fund managers are already eyeing some of the better-performing H shares such as Guangdong Kelon, Jiangxi Copper, PetroChina and China Southern Airlines.

The China Mantou Fund focuses on companies that have interests in China, including overseas listed businesses that derive the bulk of their revenues and production from the mainland and Hong Kong.

With an initial target size of US$100 million in the first year, the fund will mainly select high-growth, mid-cap China plays.

'Some large-cap companies have been well covered by other analysts, but medium-size companies with an emphasis on technology and financial services have the potential of very high-growth rates. They can grow rapidly within the next five to 10 years,' said Mr Leckie, also chairman of Woodrow Milliman China, which was involved in the mainland's expanding fund-management, pension and life-insurance markets.

The direct links between China and Taiwan had boosted confidence and opened up more investment opportunities in the mainland, he said.

'However, some foreign investors, especially those in the United States and Europe, are interested in this growing market but do not understand it,' said Mr Mantel.

'Whether the investors like it or not, they will have to come up with strategic plans to invest in China. The Chinese equities will increasingly be an independent, separate class.'

According to Mr Leckie, most China-related funds available in the market mainly invest in B shares or restrict their holdings to Hong Kong-listed companies.

However, he said, the Mantou fund would invest in any listed entity whose majority interests were in China.

'We are going to invest widely, and are not going to restrict ourselves to a particular type of shares like most other funds,' said Mr Leckie.

'The selected companies will generate more than 60 per cent of their profits from China.'

The Mantou fund targets five sectors - the Internet, telecommunications, information technology, services and transport.

'There is an expansion in the financial-services sector as banks are getting listed on board now,' said Mr Leckie.

'China's technology market has a huge upside potential and China's WTO entry will create a huge opportunity never seen before,' said Tony Zhang, IT director at Pacific Sun and co-manager of the fund.

'We want to target China's future leading companies at the early stages of their development. The share price of Legend Computer, for example, was severely depressed only a few years ago. But after its market share for computers grew from about 5 per cent a few years ago to about 30 per cent [presently], its share price has stabilised.'

Mr Zhang also is the director of China Labs, one of China's leading technology consultants.

China was on the brink of Internet revolution, said Mr Leckie.

'If you look at the number of cellular phones, the people using personal computers and the number of hits on the Internet, China may well be going from an agriculture to hi-tech stage,' he said.

Unlike some investors, Mr Mantel believed China was transparent, dismissing the risks involved.

'I think it is transparent. Newspapers are bilingual in Shanghai, Hong Kong, Beijing and Taiwan. You really can get the information and make quick decisions on investment returns if you do your research,' he said.

Graphic: hsi14agwz



WTO entry prompts China fund launch