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Asia manager who called China tech peak is ready to dive back in
IN JUNE, Jian Shi Cortesi said she sold Chinese Internet companies as the sector's valuation had reflected earnings growth optimism. The MSCI China Information Technology Index had already started its descent, and has lost more than 30 per cent since its January peak.
Now, she has some new calls.
With Asian stocks trading at a near-record discount to their US peers, the portfolio manager at GAM Investments said the time is ripe for selling some defensive stocks and going fishing for opportunities. Her firm oversees about US$146 billion in assets globally.
In her hunt for good deals, she's looking at three areas:
* China Internet: Those shares have tanked on policy headwinds, creating an opportunity to buy. While it remains uncertain how the new rules will evolve, the regulation is meant to introduce more order in the sector to prevent things from getting more "messy", according to Ms Cortesi.
"I'm quite sure the Chinese government doesn't want to hurt the Internet industry or make it grow slower or kill it - I don't think that's the intention," she said. "Internet remains the most interesting place to invest in China."
The MSCI China Information Technology gauge rose 0.9 per cent on Monday, following a 1.7 per cent decline last week.
* China autos: The Chinese car industry is still growing as demand is fundamentally there, in Ms Cortesi's view. Auto sales this year were depressed as some customers rushed to buy cars in 2017 due to tax breaks, while others delayed big-ticket purchases because of the trade dispute. Sentiment may normalise in 2019 as the government is likely to roll out more support for the industry, she said.
"We saw some auto stocks down over 50 per cent because of the shift in sentiment," she said. "Some of them are trading at very attractive valuations. All this bad news will be behind these companies when we roll over to next year."
* Korean cosmetics: Because of tensions between China and South Korea, fewer Chinese tourists have visited the neighbouring country - but that's only temporary, according to Ms Cortesi.
"The fundamental demand from Chinese consumers and Chinese women to spend more money on cosmetics has not changed," she said. "And some Korean cosmetic stocks have also come down dramatically."
In her base-case assumption, Ms Cortesi expects the MSCI Asia index excluding Japan to rally about 20 per cent next year, thanks mainly to a recovery in valuations. Offshore Chinese stocks are likely to rise a bit more, if the trade tension with the US doesn't deteriorate.
"It's always the best time to buy China or Asia when everything looks bad," Ms Cortesi said. "If we see any progress in trade negotiations next year, that will make investors go from very concerned to less concerned, and that's enough for the multiples to expand, especially given the price level that a lot of companies are trading at." BLOOMBERG