China’s stock market is lacking one major ingredient to rebound from bear territory, US fund manager says

Name: Hong Kong’s Temple Street fortune-teller predicts what’s ahead for the Year of the Tiger
Uploaded: 2022-02-06T23:30:16.000Z
Duration: 5 min 39 s
Description: Hong Kong’s Temple Street fortune-teller predicts what’s ahead for the Year of the Tiger

The CSI 300 Index slipped into bear territory for the first time since the US-China trade war broke out in 2018

Wang’s US$3.3 billion equity portfolio has about 13 per cent of its assets invested in Chinese companies, the third-largest country allocation

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A man walking past an electronic board inside the Shanghai Stock Exchange building in February 2020. Photo: Reuters

Cheryl Heng

Published: 7:30am, 7 Feb 2022

China’s policy-easing measures will need to go the distance to revive credit for businesses, before investors commit more money to the local stock market, according to US-based money manager Wang Lei.

While two key rounds of liquidity injection and lower borrowing costs since December have reinforced expectations for more, the market remains tentative. The CSI 300 Index has lost 7.6 per cent so far this year as it slipped into bear territory for the first time since the US-China trade war broke out. The MSCI China lost 1.1 per cent and global stocks declined 5 per cent.

“The markets are looking for more details, where will the fresh liquidity go into, and how will monetary policy easing be implemented at the credit level,” Wang, at Thornburg Investment Management, said in an interview. “When we see more loosening of credit lines and money flowing into the economy, such as consumption or fixed-asset investment, then I will become more positive.”

‘When we see more loosening of credit lines and money flowing into the economy, such as consumption or fixed asset investment, then I will become more positive,” says Wang. Photo: Handout

A former manager at China’s central bank, Wang now co-manages a US$3.2 billion equity portfolio, which had more than 13 per cent of its assets invested in China at the end of 2021, making it the third-largest country-allocation after Japan and France, according to fund data published by the managers on its website.

Its top Chinese holdings included China Merchant Bank, Citic Securities and Kweichow Moutai, data on its website showed. Other investments include Hong Kong-listed Alibaba Group Holding, Tencent Holdings, Bilibili and China Longyuan Power, among others. It also held shares in electric-car maker NIO.

Thornburg is an independent asset manager based in Santa Fe, New Mexico. It “eats its own cooking” such that all its money managers invest in the funds they manage.

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Hong Kong’s Temple Street fortune-teller predicts what’s ahead for the Year of the Tiger

Recent official reports on the manufacturing and services industry suggest the local economy remained downbeat last month. China’s credit cycle leads domestic economic conditions by six to nine months, which suggests that a rebound is not imminent, according to strategists at BCA Research.