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| China Still in Bear Market, Offers Opportunities, RCM Says |
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http://www.sbdailynews.com
2009-02-06 |
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China's domestic stocks are still in the grips of a bear market even with the recent rebound, offering investment opportunities as the government spends more to bolster economic growth, RCM Asia Pacific Ltd. said.
The benchmark Shanghai Composite Index has gained 24 percent since a two-year low on Nov. 4, halting a 72 percent slide from its peak on Oct. 16, 2007. The measure is the second- best performing in the world this year, surpassed only by Sri Lanka's Colombo All-Share Index.
Shares gained after the government announced a 4 trillion yuan ($585 billion) stimulus plan in November to combat the global recession that's thrown an estimated 20 million of the country's rural migrants out of work. The government may consider additional steps to boost the economy, the Financial Times reported on Feb. 2, citing Premier Wen Jiabao.
“We're hopeful that the policy initiatives will be effective,” Mark Konyn, Hong Kong-based chief executive officer of RCM Asia Pacific Ltd., which oversees $11 billion in assets, said in a telephone interview. “Now is a good time to build positions and set oneself up to take advantage of subsequent moves.”
Companies on the Shanghai Composite now trade at 16 times reported earnings, compared with 50 times a year ago, data compiled by Bloomberg show. Though China remains in a “bear market” and investors remain risk-averse, valuations have become more attractive, he said.
RCM favors shares of companies that rely on domestic demand and which will benefit from government policies to stimulate growth. Internet and telecommunication companies are among those that offer long-term growth opportunities, he added.
Economic Concerns
Gains may be limited now because of the economic concerns, he said, adding the market may be in a trading range. China's manufacturing shrank for a fourth month as exports fell because of the global recession and companies ran down stockpiles of steel, textiles and autos, a government-backed survey showed.
The Purchasing Managers' Index rose to a seasonally adjusted 45.3 in January, from 41.2 in December, the China Federation of Logistics and Purchasing said yesterday. A reading below 50 indicates a contraction.
“It's the biggest mess in our time so things probably won't return to normal so quickly,” said David Cui, Shanghai- based China strategist for Bank of America Corp.'s Merrill Lynch & Co. unit, in an interview today.
RCM's parent Allianz Global Investors received approval from China's securities regulator in December to begin investing in yuan-denominated stocks. The company aims to introduce a fund investing in China's domestic markets by March.
A total of 76 foreign institutional investors have been approved to buy and sell domestic stocks since the Qualified Foreign Institution Investor program was started in 2003. China has agreed to triple quotas under the QFII program to $30 billion.
“Last time, we had to convince investors to invest in China, now we don't have to as they're all very familiar with what's going on,” Konyn said. |
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