China’s mutual fund managers are making money again after delivering grim reports in 2022
- More than 99 per cent of equity funds in China have made positive returns this year, a stark contrast with the slump in 2022
- Money managers say to look past short-term volatility in the market and pick up stocks on dips
China’s mutual fund managers are relishing the market’s best start to a year in almost three decades, as Chinese equities became the hottest asset in the global marketplace. That will go some way to soothe the pain in 2022.
More than 99 per cent of the 2,209 equity funds recorded positive returns so far this year, with the best of the lot chalking up 15 per cent gain, according to data compiled by Eastmoney. Only six funds were in the negative, with the worst performer recording a 1.5 per cent setback.
“Major headwinds, including Covid curbs, property policies and regulatory environment, have all diminished considerably,” Zhang Kun, who manages US$12.3 billion at E Fund Management in southern Guangdong province, said in his latest report to clients on Friday.
While the market will definitely experience instability from time to time, investors should look past those fluctuations, he said. Some quality stocks are still relatively cheap and “have high odds of delivering higher returns to long-term investors”, he added.
Morgan Stanley lifts MSCI China target on robust cyclical recovery possibility
“An earlier and stronger cyclical growth recovery is on track,” Morgan Stanley’s China equity strategist Laura Wang said in a research note on Friday. A recovery in corporate earnings “could be in full swing as soon as post-Chinese New Year holiday” and investors should view any price correction as a chance to buy, she added.
This year, global funds have scooped up a net 112.5 billion yuan (US$16.6 billion) worth of onshore stocks, according to Stock Connect data. The net purchases have already surpassed the inflows of US$13 billion for full-year 2022.
Despite the bullish undertone, some are worried that the market has run ahead of fundamentals. With MSCI China valuation returning to its long-term average, investors surveyed by Bank of America said they would welcome a 5 to 10 per cent market pullback.
Feng Shui Index: CLSA says stocks face three setbacks before November surge
Zhang’s flagship vehicle, the US$7.9 billion Blue Chip Selected Mix Fund, has soared 46 per cent since the end of October, mirroring the rally in the Hang Seng Index over the same period.
“With an improved macro backdrop that comes with changes in policy, certain areas in the China market are starting to look interesting,” said Chloe Shea, investment director for multi-asset at Schroders in Hong Kong. “The expected recovery in consumption and economic activities should also give legs to selective Chinese e-commerce and online entertainment platforms.”