Not the best time to play on the bourses

Traders think wise strat­egy is to stick to stocks with solid fun­da­men­tals and steady earn­ings

China Daily (USA) - - BUSINESS - By BLOOMBERG

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.

AFP

Women work on the trad­ing floor at the Shang­hai Stock Ex­change in the Lu­ji­azui Fi­nan­cial district of Shang­hai ear­lier this month.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.