Reuters Insider - Eric Chow on Investing in the Year of the Monkey

Sino Land

04/02/2016 08:43

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 https://insider.thomsonreuters.com/link.html?cn=share&cid=1561090&shareToken=MzplZDA1MDQ0Mi0xZTBiLTQ4YzItYWYyNi0yYTVhOTg3YWU2ZWI%3D&playerName=ReutersNews 
                                                                       
 Source:             Thomson Reuters                                   
                                                                       
 Description:        The Value Partners' hedge fund manager sits down  
                     with Barron's Asia Isabella Zhong to discuss his  
                     outlook for China's economy and why a Hong Kong   
                     property developer is one of his favorite picks.  
 
 
(To access all exclusive Reuters Insider programming visit: http://insider.thomsonreuters.com) 
 
 Short Link:  http://reut.rs/1JYNFqa  
 
 
Transcript (May be auto-generated)

                 Chinese stocks have swung wildly over the past year. Fears about China's 
stalling economy are rattling investors. But at the same time, valuations have 
also pulled back sharply. So what prospects can the Year of the Monkey usher in?
To help us figure out the answer, we have Eric Chow, Investment Director at 
Value Partners. Thank you for joining us, Eric. Thanks for having me. So is it 
too much pessimism and fear about China? Sure. In terms of sentiment in the 
market, definitely the Chinese market had hit the lowest point in the last 
decade. The interesting thing about this time is that China was only about China
in the past. So a decade ago when China had a market crash, then you only affect
China. But this time, you can obviously see the difference. When China had a 
crash and also people had concern on the Chinese economic slowdown, then it'd 
also affect the market. RMB devaluation is a major concern for investors. Where 
do you see the RMB heading this year? Our view is that at best is stay flat, but
it does have a lot of room to go down in terms of depreciation due to the 
problem, in terms of the debt problem among the corporate in China and also the 
slowdown in Chinese economy. So you're net long in Mainland China A and B 
shares, but you're net short on Hong Kong-listed A shares which actually trade 
at cheaper valuations. Why is that? Well, I know that it may be confusing but to
us it's very clear. We buy the cheaper version of the corporate when they have 
due listing in both A and H share market. But some of the corporate only have 
China A share listing. So you rely that corporate in terms of the quality and 
the outlook of its development, they may only have the A shares available for us
to buy so we do not have the luxuries of every company buying the cheaper H 
share in terms of our portfolio constructions. In this volatile market, how 
should investors go about stock picking? What traits should they look for? And 
can you give us an example of a stock in your portfolio that fits those traits? 
Currently, one of our key holding is Sino Land, a Hong Kong-listed property 
developer. The market is about USD8 billion but with over 25% of the market cap 
in net cash. So it's a very healthy property developer with very strong 
portfolio in terms of rental income as well as a pipeline of development. Of 
course the land bank it holds probably is smaller than many other P/Es, but I 
think it's a healthy situation because we are, at least in the cycle in terms of
Hong Kong property sector. So having a smaller land bank actually help them to 
become more defensive and offer them better opportunity to buy cheaper land in 
the future. Well thank you, Eric. Thank you