China stock market

China’s top-performing fund manager to buy more stocks after global sell-off

HSBC Jintrust Fund Management says mainland market is attractive again after the Shanghai Composite Index dropped 9.6pc last week

PUBLISHED : Monday, 12 February, 2018, 5:33pm
UPDATED : Monday, 12 February, 2018, 10:42pm

Shi Xingtao is not the least worried about the market prospects after mainland Chinese stocks posted the worst performance among the global markets last week.

Instead, the top-performing fund manager at HSBC Jintrust Fund Management is considering adding his equity holdings, as the market has become attractive again after a 9.6 per cent decline in the Shanghai Composite Index last week.

“After this round of deep corrections, share prices of lots of listed companies are becoming more and more appealing,” he said in an emailed interview. “The investment value of the whole market is also rising.”

The investment value of the whole market is also rising
Shi Xingtao, HSBC Jintrust Fund Management

Shi said he was mulling over buying shares of home appliances, airlines, paper making and electronics companies, without going specific. Shi’s HSBC Jintrust Consumer Dividend Fund has delivered a return of 34 per cent over the past year, beating 98 per cent of the rivals, according to Howbuy, a local fund tracker.

HSBC Jintrust is the local asset-management venture with HSBC Holdings with US$4.4 billion in asset under management.

The global meltdown, which started with a sell-off in US equities on concern the Federal Reserve will raise interest rates more quickly than expected, was the last straw for the Chinese stock markets. The markets already looked shaky before the global turmoil.

The Shanghai Composite rose for 11 consecutive days in January to post the longest streak of gains in 25 years, technically taking shares to the overbought levels. While the valuations of big-caps were elevated to the highest level in two years, smaller firms were exposed to the liquidity risk as some asset-management products were forced to unwind their stock positions amid a Beijing ordered deleveraging drive in the financial sector.

After the decline, the SSE 50 Index of the biggest stocks on the Shanghai exchange, is valuated at 12 times reported earnings, down from a two-year high of 13.6 times set last month, according to Bloomberg data. The gauge jumped 25 per cent last year, the best performer among China’s benchmarks, as traders switched to larger companies on solid earnings outlook.

Still, Credit Suisse Group’s strategist Chen Li says it might be too early to buy stocks now as the decline would probably be prolonged, with China’s markets often inclined to overreact to the volatility overseas.

Jingxi Investment Management, which shares a similar view, says it is more important to follow the market trend; the market is unlikely to stage a V-shape recovery any time soon.

“We are taking a defensive approach and it’s not easy for the market to recover in the short term,” said Wang Zheng, chief investment officer at the Shanghai-based fund management firm. “The market is still in the process of releasing risks. We would conduct trading based on the trend now rather than economic fundamentals.”

The market is still in the process of releasing risks
Wang Zheng, Jingxi Investment Management

Wang said he had halved the equity position to 30 per cent of his asset allocations in the shake-out.

The Shanghai Composite rebounded 0.8 per cent on Monday trading and the SSE 50 gauge slipped 0.2 per cent for a fifth day of declines.

HSBC Jintrust’s Shi believes that valuations and fundamentals are key to stock pricing, and once the market stabilises, shares will rebound.

“We shouldn’t be too pessimistic about the market,” he said. “Blue-chips that previously had valuation pressure are now falling to levels suitable for value investing. Financial and consumer companies will still be the main themes of the market, when the market stabilises.”