Newsletter guru Jim Oberweis, whose China fund is in the top 1% of funds in its class over the past one, three, and five years, according to Morningstar, says investors look at China the wrong way.
Top U.K. fund manager Anthony Bolton says he’s expecting a rebound in Chinese growth next year.
Bolton tells Investment Week that he thinks China’s growth has actually been slower than the official 7.5% figure being cited this year. “The headline figure is not reliable and I think growth has come down below that this year,” he says. But he sees better growth in 2013, and says that economic improvements and the fact that China’s elections are over should help spur Chinese stocks next year.
“The bear market will change soon in the A share market,” he said. “The economic cycle is now in its favour, as is the political process.”
Sectors that Bolton was high on in 2012, including healthcare and consumer discretionary stocks, struggled. But he’s sticking with them heading into 2013, expecting that the changing conditions will lead to bounce-backs.
Templeton Emerging Markets Group’s Mark Mobius says he’s bullish on Chinese coal companies.
“These companies are not only mining but also producing power and the demand for power is insatiable in China and everywhere else in the world,” Mobius tells Bloomberg. His funds currently hold shares of coal companies Shenhua, Yanzhou Coal Mining Co., and China Coal Energy Co.
Chinese coal companies have been rebounding from their cheapest levels on record, Bloomberg reports, and Mobius thinks some may be ready to expand. “The slowdown that we’ve seen in global markets means there’s an opportunity for these companies to buy mines at low cost,” Mobius said.
Vanguard founder Jack Bogle says the U.S. is faring better than the rest of the world, and that China’s economy is “sinking quite a bit” right now. “The fact of the matter is our economy, U.S. GDP, is the best performer in the developed world by a good margin and the rest of the world has not made this kind of recovery,” Bogle tells Fox Business Network. “China is of course much more rapidly growing, but seems to be sinking quite a bit.” Bogle also talks about the need for regulatory clarity. “We have to get some clarity as to what the future holds in terms of the government’s role, taxes, capital gains, dividends,” he says. “I think it’s less that we get the right rules than that we get some rules.”
While Chinese stocks have fallen in recent months, top value investor Whitney Tilson isn’t seeing value in the Asian giant. In fact, he says China is “uninvestable”.
In an email to ValueWalk.com, Tilson explains how his father appears to have been scammed after recently buying a product from a Chinese website, “yet another case study that reinforces my belief that if you do business or invest in China or with Chinese companies, there’s an alarmingly high likelihood that you will get scammed”. Tilson says that rather than trying to address fraud, the Chinese government “instead … attacks those who seek to uncover it — no doubt largely because princelings (children of powerful senior leaders) are directly complicit in (and profiting enormously from) the fraud.”
Tilson adds that there are many legitimate, honest people and businesses in China. “But,” he says, “I’m convinced that the fraud is so pervasive that, as an outsider who can’t tell who/what is legit, you’re likely to get scammed.” And, for investors, here’s the kicker: “In my view,” Tilson says, “China falls into the same risk category as Russia and Zimbabwe — completely uninvestable.”
While many investors are fleeing Chinese equities, Fidelity’s Anthony Bolton remains bullish.
“People are generally cautious and are taking money out of China which, as a contrarian, I see as positive,” Bolton says, according to Investment Week. Bolton, who compiled an exceptional fund management track record in the U.K. before moving on to a China fund a couple years back, says that local, private Asian investors generally have most of their money in cash on deposit, and little in bonds and equities. “It is this money that will drive the market when the market turns,” he said. “People are not positioned for markets to go up, which is usually when they do go up.”
Bolton says the valuation picture is very good in China. “Valuations are really supportive at the moment — the valuation case for China is as good as I have seen it,” he said, adding that in terms of forward earnings, China is “off the scale,” Investment Week reported. He also thinks inflation will fall below 2% in China this year, meaning that policymakers may well act in ways that bolster equity prices.
Charles Schwab Chief Investment Strategist Liz Ann Sonders says she expects stocks of U.S. companies that do more of their business domestically rather than overseas should continue to outperform in the short term amid concerns about growth in places like China. But she also tells Bloomberg that she wouldn’t get too defensive, because countries like China have and are willing to use a lot of firepower to spark their economies. Sonders also talks about the Federal Reserve, and whether more easing on its part will lead to improvements in the economy and stock market.