Templeton, BlackRock adding to holdings in China, forecasting stock market recovery
25 December 2008
(BEIJING) The biggest investors in emerging markets say China is the best choice for 2009, betting that plans to stimulate growth will lead a stock market recovery in the fastest growing major economy.
Investors with US$63 billion of developing-nation stocks put 15 per cent of their funds into China - more than Brazil, Taiwan or South Korea and the most in 13 years, according to data compiled by EPFR Global last month. Templeton Asset Management Ltd, Schroder Investment Management and BlackRock Inc say they are adding to holdings in China.
While the MSCI China Index lost a record 53 per cent in 2008, Merrill Lynch & Co says China’s plans to spend 4 trillion yuan (S$847 billion) on bridges, housing and tax breaks will help make it the best-performing market next year, boosting shares of China Mobile Ltd, the world’s largest phone company by value, and coal producer China Shenhua Energy Co.
Investors are becoming more optimistic even as China faces its steepest slowdown in two decades, because the government has US$1.9 trillion set aside in the world’s largest reserves.
‘We’ve got the mother of all stimulus plans,’ said Plamen Monovski, an emerging-markets fund manager in London for BlackRock, which oversees about US$1.3 trillion. ‘Savings rates are high, prices of commodities have come down and employment is unlikely to collapse.’
Mutual funds focused on China received a net US$1.2 billion from investors in the past two months, compared with US$25 million for Brazil, according to EPFR, a research firm in Cambridge, Massachusetts, that specialises in investment flows. India and Russia funds suffered a combined US$778 million in withdrawals, the EPFR data shows.
Funds investing in emerging-market stocks worldwide raised their holdings of Chinese equities last month to the highest level since EPFR began collecting the data in 1995, increasing the weighting from an average of 10.7 per cent in January.
Shares of Chinese companies accounted for 16 of the 30 best performers in the MSCI emerging markets index as it rebounded from a four-year low in October, including 13 stocks that more than doubled.
China Mobile, China Shenhua and Ping An Insurance (Group) Co are among 20 emerging-market stocks worldwide that are the ‘best of breed’ because of ‘solid’ balance sheets and increasing profitability, according to Michael Hartnett, the New York-based emerging-market strategist at Merrill.
Beijing’s State Council announced a spending package last month for low-rent housing, roads, railways and airports, along with tax deductions on industrial purchases. The package is equivalent to about 18 per cent of China’s gross domestic product, compared with the US$1.4 trillion of stimulus plans under consideration in the US that amount to 10 per cent of GDP.
China aims for 8 per cent economic growth to create jobs and maintain social stability in the nation of 1.3 billion, according to Banking Regulatory Commission chairman Liu Mingkang. Goldman Sachs Group Inc forecasts expansion will slow to 6 per cent next year because of weaker exports and investment - half the 11.9 per cent pace in 2007. ‘Even at 6 per cent growth, that’s very high when you compare it with the growth, or lack thereof, in Europe, the US and Japan,’ Mark Mobius, who oversees about US$26 billion in emerging-market shares as executive chairman of Templeton, said in a Bloomberg TV interview from Hong Kong last week. ‘We are buying Chinese stocks pretty aggressively.’
‘There’s value starting to reappear in China,’ said Allan Conway, the London- based head of emerging- market equities at Schroder, which oversees about US$170 billion. China is his biggest ‘overweight’ holding. ‘What we highlight in China is their ability to stimulate domestic demand.’
Lower borrowing costs and government spending may not be enough to keep the Chinese economy from contracting as the first simultaneous recessions in the US, Japan and Europe since World War Two reduce exports, said Marc Faber, publisher of the Gloom, Boom & Doom Report.
‘The Chinese economy, in my opinion, is also in recession’ even though the government won’t report ‘recessionary figures,’ Mr. Faber said in a Bloomberg TV interview from Zurich this week. -- Bloomberg
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Stimulus Plans Draw Funds to China Stocks
Templeton, BlackRock adding to holdings in China, forecasting stock market recovery
25 December 2008
(BEIJING) The biggest investors in emerging markets say China is the best choice for 2009, betting that plans to stimulate growth will lead a stock market recovery in the fastest growing major economy.
Investors with US$63 billion of developing-nation stocks put 15 per cent of their funds into China - more than Brazil, Taiwan or South Korea and the most in 13 years, according to data compiled by EPFR Global last month. Templeton Asset Management Ltd, Schroder Investment Management and BlackRock Inc say they are adding to holdings in China.
While the MSCI China Index lost a record 53 per cent in 2008, Merrill Lynch & Co says China’s plans to spend 4 trillion yuan (S$847 billion) on bridges, housing and tax breaks will help make it the best-performing market next year, boosting shares of China Mobile Ltd, the world’s largest phone company by value, and coal producer China Shenhua Energy Co.
Investors are becoming more optimistic even as China faces its steepest slowdown in two decades, because the government has US$1.9 trillion set aside in the world’s largest reserves.
‘We’ve got the mother of all stimulus plans,’ said Plamen Monovski, an emerging-markets fund manager in London for BlackRock, which oversees about US$1.3 trillion. ‘Savings rates are high, prices of commodities have come down and employment is unlikely to collapse.’
Mutual funds focused on China received a net US$1.2 billion from investors in the past two months, compared with US$25 million for Brazil, according to EPFR, a research firm in Cambridge, Massachusetts, that specialises in investment flows. India and Russia funds suffered a combined US$778 million in withdrawals, the EPFR data shows.
Funds investing in emerging-market stocks worldwide raised their holdings of Chinese equities last month to the highest level since EPFR began collecting the data in 1995, increasing the weighting from an average of 10.7 per cent in January.
Shares of Chinese companies accounted for 16 of the 30 best performers in the MSCI emerging markets index as it rebounded from a four-year low in October, including 13 stocks that more than doubled.
China Mobile, China Shenhua and Ping An Insurance (Group) Co are among 20 emerging-market stocks worldwide that are the ‘best of breed’ because of ‘solid’ balance sheets and increasing profitability, according to Michael Hartnett, the New York-based emerging-market strategist at Merrill.
Beijing’s State Council announced a spending package last month for low-rent housing, roads, railways and airports, along with tax deductions on industrial purchases. The package is equivalent to about 18 per cent of China’s gross domestic product, compared with the US$1.4 trillion of stimulus plans under consideration in the US that amount to 10 per cent of GDP.
China aims for 8 per cent economic growth to create jobs and maintain social stability in the nation of 1.3 billion, according to Banking Regulatory Commission chairman Liu Mingkang. Goldman Sachs Group Inc forecasts expansion will slow to 6 per cent next year because of weaker exports and investment - half the 11.9 per cent pace in 2007. ‘Even at 6 per cent growth, that’s very high when you compare it with the growth, or lack thereof, in Europe, the US and Japan,’ Mark Mobius, who oversees about US$26 billion in emerging-market shares as executive chairman of Templeton, said in a Bloomberg TV interview from Hong Kong last week. ‘We are buying Chinese stocks pretty aggressively.’
‘There’s value starting to reappear in China,’ said Allan Conway, the London- based head of emerging- market equities at Schroder, which oversees about US$170 billion. China is his biggest ‘overweight’ holding. ‘What we highlight in China is their ability to stimulate domestic demand.’
Lower borrowing costs and government spending may not be enough to keep the Chinese economy from contracting as the first simultaneous recessions in the US, Japan and Europe since World War Two reduce exports, said Marc Faber, publisher of the Gloom, Boom & Doom Report.
‘The Chinese economy, in my opinion, is also in recession’ even though the government won’t report ‘recessionary figures,’ Mr. Faber said in a Bloomberg TV interview from Zurich this week. -- Bloomberg
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