Business World

Monday 5 December 2016

Top China fund manager puts half of his cash mountain back into equities

Zhang Shidong

Published 10/07/2016 | 02:30

At the end of 2015, a top China fund manager was so worried about the outlook for stocks that he held as much cash as he possibly could. Now, he's loading up on equities.
At the end of 2015, a top China fund manager was so worried about the outlook for stocks that he held as much cash as he possibly could. Now, he's loading up on equities.

At the end of 2015, a top China fund manager was so worried about the outlook for stocks that he held as much cash as he possibly could. Now, he's loading up on equities.

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Qiu Dongrong is buying shares in pharmaceutical, chemical and construction material firms, he said in an interview last week. The fund manager at HSBC Jintrust Fund Management Co has whittled down cash to about 7pc of assets from 15pc on December 31, and says his main strategy is to pick up stocks trading at low valuations. His $323m large-cap fund has beaten 94pc of peers over the past three years.

For Qiu, the Shanghai Composite Index's slump at the start of the year created a mismatch between stock prices and signs of a stabilising economy - and a buying opportunity. The measure is up 13pc from January's low, with consumer-staple and material stocks leading the rebound with gains of at least 25pc. "Lots of sectors and individual stocks have factored in extremely pessimistic expectations," said Qiu (32). "There's a chance for stock valuations to recover from those lows. The real situation actually isn't as bad as people expected."

While figures due next week are forecast to indicate a third straight monthly drop in exports, official data shows producer prices have risen for three consecutive months and manufacturing is stabilizing. The People's Bank of China may cut lenders' reserve-requirement ratios to cushion the impact of Britain's vote to leave the European Union, according to HSBC Holdings and AXA Investment Managers Asia

Qiu hasn't escaped the 2016 slide unscathed: his fund's down 6.2pc. Still, that beats 89pc of his peers, data compiled by Bloomberg shows. The Shanghai Composite sank 15pc in the same span.

Bloomberg

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