China Fund Manager Up 52% for Year Starts Buying More Stocks

(Bloomberg) --

A Chinese money manager whose stock fund has climbed 52% in 2020 says May is no time to shy away from equities.

Wang Rongxin, general manager of Beijing-based Rosin Asset Management Corp., thinks a buying window is at hand. Key annual meetings of the country’s top legislature are set to start in two weeks, and he says possible policies to emerge should fuel China’s economic recovery following pandemic-related lockdowns.

In a sign of more policy support coming, the state-run China Securities Journal said in a front-page commentary Friday the country’s central bank may further cut some banks’ reserve requirements or interest rates on medium-term lending facilities or reverse repurchase agreements later this month.

The Zhonggang Yinrun Private Equity Investment Fund, which launched in August, has benefited so far this year from bets in 5G, electric vehicles and pharmaceuticals paying off. It has averaged about a 75% allocation in stocks, but he said the fund could top 90% this month.

“There are dozens of stocks currently on my radar with relatively higher certainty” in areas from infrastructure to the digital economy, said Wang. “Market valuations are close to the bottom, so I am gradually increasing positions. If the market drops 5% or more, I will buy stocks decisively.”

China’s stock market, the only one among the world’s biggest to have not fallen into bear territory this year, has also held up following the recent five-day Labor Day holiday. Investors have shrugged off escalating tensions between the U.S. and China, instead focusing on the prospect of more stimulus from Beijing later this month that could put a charge in the country’s financial markets.

One prime target for Wang is infrastructure, long a home for stimulus spending in China. A trial of real estate investment trusts was announced last week, geared toward allowing Chinese to help fund infrastructure projects. And from the government, “there is still a lot of room for fiscal policy” to be put toward infrastructure, he said.

The fund at Rosin, a firm which manages about 1 billion yuan ($141 million), has been helped by investor optimism toward the rolling out of China’s 5G wireless network and the country’s push to deepen health-care reforms in the wake of the coronavirus, said Wang. Data centers are also a favored sector of his, in the wake of the big work-from-home shift and jump in e-commerce activity.

He does say investors should remain cautious. “We need to keep an eye on whether there will be another wave” of Covid-19 infections as China’s economy continues to reopen. If new cases pick up, Wang said corporate earnings could remain pressured into the third quarter. He also would pare his positions if those stocks fall 10%.

Economic doubts persist, with the earliest April data showing some momentum loss in China and the month’s export growth not expected to persist near-term. Renewed tussles between the U.S. and China also bear watching, he said, but the stock impact from what in recent weeks has been limited to a war of words is “marginally declining.”

“The market doesn’t expect the friction will end any time soon, and relations may even deteriorate,” Wang added. “For Chinese investors, the government’s determination to boost economic growth outweighs concern about U.S.-China relations.”

©2020 Bloomberg L.P.

With assistance from Bloomberg