Stock pickers told to do homework when making decisions
Updated: 2013-01-09 07:00
By Gao Changxin(HK Edition)
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Investors who are betting on the Chinese mainland will need more skills and greater efforts to come out of 2013 in the black, as recent changes in the economy require investors to be more "company specific" when making decisions, fund managers said.
"We need to be more focused (in 2013) on stock specifics," said Agnes Deng, head of Hong Kong China Equities with Baring Asset Management (Asia) Ltd, a British fund manager.
"More studies, more researches and due diligences are needed against individual names," she said.
Over the past three years, the major Chinese equities drivers were external factors, including developments in the US and European markets, said Deng, who manages the $2.73 billion Baring Hong Kong China Fund. But this year, the effects of those factors have become less drastic even as the Chinese economy bottomed out from a slowdown in late 2012.
"What investors have to do this year," Deng added, "is to be more company specific and apply more effort in picking out stocks that can outperform the market. And also ensure more due diligence, including carrying out researches and management interviews to select the right stocks."
Growth on the Chinese mainland bottomed out in the third quarter of 2012, as the economy expanded 2.2 percent quarter-on-quarter. While many analysts believe that the recovery will further extend into 2013, Deng feels the recovery this time won't be as strong as the last one in 2009 when the country bounced back from the global financial crisis.
"Investors have to be more selective if they want to benefit from a moderate recovery," said William Fong, who manages the $63 million Baring China Select Fund.
Deng and Fong refused to give names of specific stocks they are looking at, but pointed out that consumption-related, light industrial and information technology sectors stand out as attractive buys.
Overall, Deng said the A-share market's valuation, despite recent adjustments, is still at a historical low, and is posed ready to increase positions.
As of Nov 30, 2012, the Baring Hong Kong China Fund has 2 percent of its capital in A shares, 44.8 in H shares and 16 percent in red chips. Its top 10 holdings include Industrial and Commercial Bank of China Ltd, China Mobile Ltd and PetrolChina Co Ltd.
The Shanghai Composite Index dipped 0.4 percent on Tuesday to 2276.07 points. The benchmark has rallied 16 percent from an almost four-year low on Dec 3 on signs that a recovery is on the way. The Shanghai Composite trades at 12.6 times reported earnings, the highest level since June, according to daily data compiled by Bloomberg since 2006.
In Hong Kong, the benchmark Hang Seng Index lost 0.94 percent to 23111.19 points.
(HK Edition 01/09/2013 page2)