Invesco has moved to a more aggressive weighting in China in its GT Hong Kong & China Growth and GT ...
Invesco has moved to a more aggressive weighting in China in its GT Hong Kong & China Growth and GT Orient funds.
Fund manager Billy Chan, who runs both funds, said the reweighting of China follows positive macro-economic indications that China is emerging from its seven-year trough. Chan, who has upped the China weighting in the Hong Kong & China Growth Fund to 24% from 15% in April, said export growth was up 40%, industrial production growth was up 12% from this time last year and retail growth looks set to go into double figures.
The weighting in the GT Orient Fund has moved from 1.8% on 1 July 2000 to over 5%.
Chan said China was benefiting from synchronised world growth, a huge internal infrastructure spend and admission to the WTO, and there was no danger of the economy overheating.
Chan said: "We have moved towards increasing the weighting in China to some of the larger cap companies like China Mobile, and Petro China and some of the smaller domestic players like Cosco Pacific which is a postal and export container operator."
The change has not reduced its large positions in the very closely aligned Hutchison Whampoa and Cheug Kong stocks.
Within the Hong Kong & China fund, Invesco has a 9.57% weighting in Hutchison Whampoa and 9.9% in Cheung Kong, while the GT Orient Fund has weightings of 6.36% and 5.18% respectively. Hutchison Whampoa and Cheung Kong both gain their direction from Hong Kong tycoon Li Ka Shing. Hutchison is seen by the market as the more attractive stock with 60% of its NAV consisting of telecommunications interests.
Many funds gain greater exposure to Hutchison through Cheung Kong because more than 70% of Cheung Kong's assets come from its 49% holding in Hutchison. Chan, however, said his position in Cheung Kong was a property play. He said the remaining 30% of Cheung Kong is made up of property development business in Hong Kong, an industry which is at the lowest point in the property cycle and due a reweighting.
Despite the close links between the two stocks, there is nothing to exclude a weighting of 10% in each stock, according to Autif.
Andrew Saltan, fund manager of Old Mutual Hong Kong & China fund, said fund managers who benchmarked against the Hang Seng, are forced into heavy weightings unless they wish to take a big bet against the index of which Hutchison alone makes up 13.3%. Saltan currently has weightings of 8% in Hutchison and 6.5% in Cheung Kong.
Saltan, who believes Hutchison is fairly fully valued and has reduced his holding since March, said the performance of Hutchison can impact directly on Cheung Kong. However, as Cheung Kong often trades at a large discount to NAV it is seen as good value.
Vanessa Donegan, head of the Asian desk at Threadneedle, said the risk management rules at Threadneedle were designed not to allow too much of a portfolio to be held in a small number of stocks, and it was for this reason that many narrow Far East funds were so volatile.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation