Fidelity is bullish on China’s small tech stocks after MSCI inclusion

PUBLISHED : Thursday, 22 June, 2017, 9:07pm
UPDATED : Thursday, 22 June, 2017, 10:43pm

Money manager Fidelity International has delivered a vote of confidence for the mainland’s technology stocks after global index provider MSCI decided to include A-shares in its emerging market benchmarks.

Raymond Ma Lei, a portfolio manager focusing on A-shares at Fidelity International, said the mainland stock market was filled with prospective companies that could generate handsome returns for overseas investors, spurred by the country’s accelerated efforts to encourage technological innovation.

“I feel confident, and enjoy investing in Chinese shares,” he told reporters at a media briefing on Thursday. “In terms of fundamentals, China’s economy remains strong.”

MSCI said on Wednesday that it would add 222 A-share stocks to its benchmark emerging markets index, which will represent 0.7 per cent of the indicator’s weighting.

The inclusion of A-shares in the benchmarks will technically direct a capital inflow to the mainland stock market as global funds track the indicators to allocate the assets under management.

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Ma said Fidelity International had already earmarked more than 0.7 per cent of its assets to buy A-shares, without disclosing the amount and details of its investment.

The A-shares’ weighting in the MSCI benchmarks could rise if Beijing implements more market reforms.

In terms of fundamentals, China’s economy remains strong
Raymond Ma, Fidelity International

Beijing is spearheading to transition the country’s economic growth pattern as authorities encourage businesses to better use the latest information technologies to improve efficiency in manufacturing and commerce while cutting their reliance on massive fixed-asset investment and exports.

In China, E-commerce, financial technology (fintech), online payment and bike-sharing services have deeply penetrated people’s daily life, which in turn would bolster consumption.

Ma said the huge collections of data sets that help accurately analyse consumers’ demands and habits in China became a driving force for the booming internet-based businesses in the world’s most populated market.

Early this year, Stephen Dover, chief investment officer of Templeton Emerging Markets, said that some mainland-listed small-cap technology companies were good buys, but many global investors had missed the opportunities.

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Ma said that some of the small-cap A-shares that Fidelity bought earlier were offering attractive prices amid low valuations before their businesses grew on a fast track to bring investors lofty returns.

In January, Fidelity International announced that its wholly-owned company in Shanghai became the first overseas player that could carry out hedge fund businesses in China’s A-share market.

FIL Investment Management (Shanghai) is allowed to raise funds from high-net-worth mainland individuals and institutions to directly trade A-shares.

There have been concerns among global investors about the mainland firms’ lax management and misleading information disclosure.

Ma disagreed.

“Corporate governance by A-share firms is improving,” Ma said. “We believe they will improve further.”