Plenty of good buys in China’s A-share market, fund manager says
Beijing's recent intervention in the market spooked some investors, but Oaktree Capital chief Howard Marks says they jumped without reason
Chinese stocks are attractively priced after the market rout, says Oaktree Capital, the world’s largest distressed-asset manager, pining long-term hope on the A-share market shrugging off slowing economic growth.
“We have found equities in China that have been worth holding,” said Howard Marks, chairman of Oaktree, which has more than US$5 billion invested in Greater China. “We strongly believe in the A-share market.”
It was less attractively priced when the benchmark Shanghai Composite Index was at 5,200 points, but there were good buys at the 3,100-point level, he said.
The firm, headquartered in Los Angeles and with US$103 billion assets under management, specialises in corporate and distressed investments such as non-performing loans.
“We have a substantial position in Chinese equities today and we are very comfortable," Marks said. Investing in good companies at attractive prices was "easily accomplished today", he said, adding Oaktree’s investments were mostly in listed equities.
The mainland’s stock market has been volatile since the benchmark Shanghai Composite Index peaked on June 12 at 5,178.19 points. It fell as much as 40 per cent last month, despite a slew of measures launched by the government.
“China put out some bad news [that] panicked some people with the market corrected very strongly. Some people outside of China looked at that and said the China market is telling us there was a big problem so we’d better sell our stocks,” Marks said.
But one thing I believe very strongly is that you should not do what the market tells you
“But one thing I believe very strongly is that you should not do what the market tells you. The market doesn’t know anything; the market is just made up of people,” the billionaire investor said. Don’t sell because the market is going down, rather sell if it’s a bad investment, he advised.
The more reasonably priced stocks made a good case for investing for the long run as he predicted a “bright future” in China.
Oaktree made its first investment in non-performing loans this past May and would continue, he said. “NPL investment will be a good idea if banks are willing to sell them at reasonable prices, which we believe to provide good return.”
Some foreign investors viewed Beijing’s efforts to shore up the stock market as evidence the capital market lacked maturity and liquidity. But Marks said the intervention was “very acceptable”.
Beijing had asked companies to buy their own shares and encouraged top executives to do the same. The United States and Europe had taken similar actions in the past to support stock prices, when it appeared a slump could undermine the health of financial institutions and confidence, Marks said.
