Mutual fund expects govt to withdraw stimulus policies gradually
China Asset Management Co, the country’s biggest mutual fund company, bought developers in its flagship fund in the first quarter, predicting ‘gentle’ tightening this year, according to the company’s Web site.
Wang Yawei cut the proportion of equities in his China AMC Large-Cap Select Fund, the best-performing China-based fund over the past five years, to 88.6 per cent as of March 31, compared with 93 per cent in the preceding quarter. He sold manufacturers as speculation increased that China may revalue its currency.
‘China will continue to exit its stimulus policies,’ said Mr Wang in the regulatory filing posted on its Web site. ‘Tightening will be gentle.’
China has ordered banks to set aside more deposits as reserves twice this year to slow record loan growth and curb property-price gains. A measure of real-estate stocks on the Shanghai Composite Index has declined 19 per cent this year, the worst performer among the five industry groups.
The fund’s top stock holding, Xinjiang Guanghui Industry Co, a real-estate developer and coal producer, jumped 4.7 per cent on Tuesday, extending this year’s gains to 45 per cent compared with the 9 per cent drop in the Shanghai Composite.
Mr Wang bought developers before the government recently announced more measures to curb property speculation. China on Tuesday ordered developers not to take deposits for sales of uncompleted apartments without proper approval and barred them from charging ‘abnormally high’ prices, stepping up efforts to prevent a property bubble.
Recent stock declines have made China’s developers ‘more attractive’ as the curbs on bank lending drove valuations to a year-low and made interest rate increases less likely, Chris Ruffle, who helps manage US$19 billion as China co-chairman of Martin Currie, said on Monday.
Morgan Stanley analyst Jerry Lou recommended on Monday that investors avoid property, banking and construction material stocks, saying the ‘austerity’ measures may be negative in the near term.
The focus on developers’ sales tactics adds to curbs on loans for third-home purchases, increased down payment requirements and higher mortgage rates announced in the past week.
China’s Cabinet has said stricter measures to control speculation are needed after property prices in 70 cities jumped a record 11.7 per cent in March.
Property stocks accounted for 15.7 per cent of the fund at the end of the first quarter, compared with 11.8 per cent at the end of the last year, according to the fund statement.
The sale of manufacturing stocks comes as speculation increased that China may revalue its currency, which has been pegged to the dollar at about 6.83 yuan since July 2008.
Source: Business Times, 22 Apr 2010