Not the best time to play on the bourses
Traders think wise strategy is to stick to stocks with solid fundamentals and steady earnings
For China’s stock market traders, life’s proving to be tough of late.
The Shanghai Composite Index has swung less than 1 percent on a daily closing basis for 17 days in a row, a phenomenon that last occurred in 2001 when the nation’s equity market was just a decade old. Turnover is down 76 percent from last year’s peak and a measure of volatility has dwindled to a two-year low.
The subdued trading signals the impact of Chinese policymakers’ efforts to shore up the world’s second-largest equity market in thewake of a $5-trillion rout last year.
Moves by State-backed funds to trim holdings can spur a selloff, prompting them to step back in again, according to Jingxi Investment Management Co.
“It’s becoming difficult for
The most important thing now is to go back to fundamentals and earnings, and choose those stocks with solid earnings support.” Mo Haibo, head of research and investment at Wanjia Asset Management Co in Shanghai.
us to play in the market now,” said Wang Zheng, Shanghaibased chief investment officer at Jingxi. “The ‘national team’ is very deeply involved, and its main purpose is to prevent the market from moving up or down too extremely. Sometimes when the market looks set to break out and you buy shares to wait for them to rise, the good momentum would suddenly stop.”
Government-backed funds were seen selling bank shares in mid-August as the Shanghai Composite surged to a sevenmonth high, while China’s top decision-making body said in July that the nation would curb asset bubbles.
State-backed funds hold an estimated 1.2 trillion yuan ($180 billion) of stocks, about half the size of the nation’s equity-focused mutual funds, according to Howbuy, a Shanghai-based fund tracker.
For top-performing fund manager Mo Haibo, the best strategy now is to stick to stocks with solid fundamentals and earnings, and avoid high-valuation, smaller companies amid falling risk appetite. His Wanjia Selective Mixed Fund has returned 8 percent this year, compared with a 13 percent decline on the Shanghai Composite.
“Though the benchmark hasn’t moved much recently, there are some stocks that have performed quite well,” said Mo, head of research and investment at Wanjia Asset Management Co in Shanghai. “The most important thing now is to go back to fundamentals and earnings, and choose those stocks with solid earnings support.”
Mo says he’s overweight on infrastructure-related stocks as the government is stepping up efforts to encourage private investment in projects from water conservancy to environment protection to cushion a slowdown in the economy. He didn’t name any specific stock.
Jingxi Investment’s Wang said he avoids shares that are held heavily by the State, and chases the short-lived and hot thematic plays. Wang said this strategy has helped him make some quick profits from buying into property and infrastructure shares.
For the market to break out of the lackluster pattern, the government will need to deliver a signal that it is loosening its grip on the market, said Zhang Gang, a strategist at Central China Securities Co in Shanghai.
Women work on the trading floor at the Shanghai Stock Exchange in the Lujiazui Financial district of Shanghai earlier this month.