Fund titans buying Chinese stocks on bets worst is over

Bloomberg

Franklin Templeton Investments and Eastspring Investments are joining a growing list of money managers snapping up Chinese stocks on bets that Beijing’s pivot away from Covid Zero will bring significant gains.
China’s world-beating rally this month has solidified convictions that recent losses are a thing of the past as a property rescue plan and easing on virus controls bolster sentiment. The MSCI China Index has gained more than 24% in November, while a gauge of global shares has advanced just 5%.
“The worst is already priced in and you’ve got plenty of upside” for Chinese equities, said Bill Maldonado, chief investment officer at Eastspring in Singapore, which oversees $222 billion. “You’d be buying now and expecting things to kind of rebound on a three-to-six-month basis.”
The view is echoed by Templeton’s Manraj Sekhon, who said “it’s time to get involved in China if you haven’t already.”
The bullish take from two investment veterans — who have more than half a century of markets experience combined — coincides with calls from Fidelity International and China Asset Management, which have also expressed confidence in the nation’s assets.
The turnaround has been a long time coming. Chinese stocks had been sliding for more than a year, with as much as $6 trillion being wiped off total market capitalization between a peak last February and a low set last month when President Xi Jinping secured a third term. The rally then began due to easing of Covid restrictions and improving Sino-US ties.
The Hang Seng China Enterprises Index has jumped 25% this month to be one of the best-performing major indexes globally, having led losses worldwide through October.
Beijing’s efforts to loosen some of its Covid restrictions are a step in “the right direction,” said Templeton’s Sekhon, whose firm oversees $1.3 trillion. Along with thawing US-China relations that have “set a floor on market sentiment,” local equities are now at an inflection point that present a chance to buy, he said.
For Eastspring’s Maldonado, the opportunities includes companies linked to the electronic vehicle boom, green technology and the semiconductor industry.
“Valuations had gotten very cheap and earnings expectations had gotten very, very low,” he said.

Investment Giants With $2.3 Trillion Bet on More Market Turmoil
Tumbling global stock and bond prices this year, together with pain in private equity amid deteriorating deal volume left investors around the world casting their nets far and wide for opportunities.
In interviews with Bloomberg News, seven institutional investors with about $2.3 trillion in combined assets under management from Beijing to Toronto and Melbourne outlined investment plans heading into what’s likely to be a challenging 2023.
Some say valuations in public and private markets need to fall further before they’ll spend big, building up cash piles that will enable them to react quickly when an investment thesis aligns. Meantime, others are spotting areas like rare metals as a home for their capital as long-term shifts leave these sectors ripe for big payoffs.
Despite steep declines this year, China’s A-share stock
market remains a better option than US, European or Hong Kong equity markets.
, according to Richard Pan, Chief Investment Officer of global capital investment at Beijing-based China Asset Management.