Beijing will act rationally and any effort to rein in lending probably won’t weigh on economic growth, he says
INVESTOR Mark Mobius says the bubble in China’s property market isn’t about to burst.
‘The Chinese will act rationally and they’re not going to kill the market,’ Mr Mobius, who oversees US$34 billion of developing-nation assets at Templeton Asset Management Ltd, said in an interview in Singapore. ‘There’s still a lot of savings in China. Prices are high but I don’t see a crash.’
Mr Mobius said he plans to increase holdings in Chinese stocks by purchasing shares that benefit from consumer demand, including developers and raw-material suppliers.
Shanghai’s index of property stocks has lost 28 per cent in the year through Jan 7 after reaching a one-year high in July. It rallied 1.1 per cent yesterday, halting four days of losses.
Rising new loans last year caused property prices to climb ‘too quickly,’ while surging commodity costs increased inflationary pressure, Premier Wen Jiabao said on Dec 27. The central bank sold three- month bills at a higher interest rate for the first time in 19 weeks on Thursday after saying that policymakers will seek ‘moderate’ loan growth while managing inflation expectations.
Any efforts to rein in lending probably won’t weigh on economic growth, and productivity will keep a lid on inflation, Mr Mobius said in Thursday’s interview. China’s economy grew 7.7 per cent in the first nine months of 2009, near the government’s 8 per cent target for the year.
‘They are watchful and they are not going to let things get out of control,’ he said. ‘We don’t think they are going to dampen growth. They want growth to continue but they want it at a measured pace and there’s nothing wrong with that.’
The central bank, which has kept its benchmark one-year lending rate at a five-year low of 5.31 per cent after five reductions in the last four months of 2008, allowed a record 9.21 trillion yuan (S$1.88 trillion) of new bank loans in the first 11 months of 2009.
Stock investors remain ‘complacent’ on inflation and tightening risks, BNP Paribas said in a report dated Jan 7. The brokerage said the central bank is likely to implement ‘a series of hikes’ in three- month and one-year bill auction yields to guide market expectations of a monetary policy shift and may raise the bank reserve ratio in the first quarter.
The Shanghai Composite Index, tracking the larger of the nation’s two stock exchanges, climbed 0.1 per cent, reversing an earlier loss of as much as 1.4 per cent. Hong Kong’s Hang Seng China Enterprises Index of mainland shares traded in the city fell 0.3 per cent.
‘We actually have a long-term bullish view on China but in the short term, we’re actually less bullish,’ Joseph Zeng, head of Greenwoods Asset Management Ltd’s Hong Kong office, said in a Bloomberg Television interview yesterday.
‘The market is going to be like a ‘W’ shape. This means more volatility, but it’s still going to move up.’
While China remains Mr Mobius’s top pick among the largest emerging markets, its weighting in his portfolios lags behind Brazil, Russia and India because of gains in other markets, he said.
China’s property prices climbed in November at the fastest pace since July 2008. Residential and commercial real estate prices in 70 major cities rose 5.7 per cent from a year earlier, compared with a 3.9 per cent gain in October. The government imposed a sales tax last month on homes sold within five years of their purchase and took other steps to curb property price increases.
China Vanke Co, the nation’s largest publicly-traded developer, and Guangzhou R&F Properties Co are among the worst performers on the MSCI China Index in the last six months. The measure has climbed 23 per cent during the period, lagging behind a 35 per cent gain in the MSCI Emerging Markets Index.
Property stocks will rebound because the policy changes have already been ‘factored into’ share prices, CLSA Asia-Pacific Markets’ Shanghai-based head of China A-share research Manop Sangiambut said last month.
Andrew Mattock, who manages the US$342 million Henderson Horizon China Fund, also said in December that he will stay ‘fairly aggressive’ on property stocks because the risks of curbing loan growth are priced in.
Source: Business Times, 9 Jan 2010
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