China investors seek to turn Trump panic into profit

Xingda International Holdings

10/11/2016 09:38

By Samuel Shen and John Ruwitch 
    SHANGHAI, Nov 10 (Reuters) - Chinese investors, well known 
for their impulsive trading habits, appeared composed in the 
wake of Republican Donald Trump's shock presidential victory, as 
they drew lessons from the sell-off after Brexit. 
    Instead of joining the global stampede for the exits, many 
mainland investors pounced on battered stocks in Hong Kong 
during Wednesday's sell-off. Now, they are strategising how to 
profit from the president-elect's China policies - such as 
shorting Chinese exporters or buying agriculture stocks. 
    "Brexit has taught us how to deal with black swans," said 
Robert Di, Shanghai-based founding partner of investment firm 
RPower Capital, referring to the surprising British vote to 
leave the European Union that triggered panic selling worldwide, 
only to be followed by sharp rebounds. 
    "A lot people were caught unprepared by Brexit, but this 
time, many had been waiting for that sort of golden buying 
opportunity, which is why it's so short-lived." 
    Di said he increased holdings in Hong Kong-listed tire & 
rubber maker Xingda International Holdings  1899.HK  on 
Wednesday at the depth of the Trump-triggered market tumble, and 
is also considering shorting Chinese exporters, which are 
vulnerable to Trump's protectionist policies.    
    The bet has proved profitable so far as Hong Kong stocks 
recovered most of their losses on Thursday. Sentiment was much 
calmer on the mainland, where stocks  .CSI300  dropped just 2 
percent on Wednesday, and quickly recovered lost ground on 
Thursday, climbing to a fresh 10-month high.   
    Di's view was echoed by Zhu Lijie, analyst at Qilu 
Securities Asset Management Co, who sees investment 
opportunities in the "Trump panic."  
    "At that very moment of Brexit, the world shuddered, but it 
was not long before all asset prices recovered lost ground." 
    Betting on a repeat of such a rebound, mainland investors 
spent roughly 5 billion yuan ($736.5 million) buying Hong Kong 
stocks on Wednesday via the Shanghai-Hong Kong Stock Connect 
channel  .SQUOTA.HS . 
    In contrast, net inflows had been negligible during the 
previous month, which traders attributed to concerns over the 
U.S presidency and a looming Federal Reserve rate hike. 
    Ma Hong, general manager of Shanghai TopFund Investment 
Management Co, said it was worthwhile hunting for bargains in 
Hong Kong as shares there are more cheaply priced than their 
mainland peers. Furthermore, they will benefit from a strong 
dollar, to which the Hong Kong currency is pegged. 
    There are restrictions on purchases of property and foreign 
currencies in China, so buying Hong Kong stocks through the 
Connect "is a good way to hedge against yuan depreciation 
risks", Ma said. 
    Some Chinese investors are already designing strategies to 
bet on sectors that will benefit the most from Trump policies.  
    Ke Haidong, fund manager at First Seafront Fund Management 
Co, said China's agricultural stocks may be worth investing in. 
He foresees the possibility of retaliatory Chinese tariffs on 
U.S. imports if Trump implements his protectionist policies, 
thus pushing up prices of agricultural products in China. 
    Investors are also betting the infrastructure sector could 
benefit from Trump's foreign policies, which would make it 
easier for Beijing to push its "One Belt One Road initiative," 
wrote Julian Evans-Pritchard, China Economist at Capital 
Economics. 
    "Declining U.S. influence would give China more freedom to 
shape the regional landscape," he said. 
    "The One Belt One Road initiative gives China a means to 
leverage closer political links to promote closer economic 
integration." 
    Thomas Poullaouec, managing director of State Street Global 
Advisors Asia, agreed. 
    "Overall, I will have the argument that this could be 
positive for China in its global outreach," he said.  
    "Because it's unlikely that many countries will make friends 
with Trump, putting aside Putin ... so it may be positive for 
China in its global efforts."    
     ($1 = 6.7890 yuan) 
 
 (Editing by Jacqueline Wong) 
 ((samuel.shen@thomsonreuters.com;  +86 21 6104 1789; Reuters 
Messaging: samuel.shen.thomsonreuters.com@reuters.net)) 
 
Keywords: USA ELECTION/CHINA INVESTORS