London hedge fund manager Marshall Wace LLP has been buying Chinese property and banking stocks for two of its financial hedge funds on expectations a stuttering global economic recovery wil
London hedge fund manager Marshall Wace LLP has been buying Chinese property and banking stocks for two of its financial hedge funds on expectations a stuttering global economic recovery will ease domestic tightening reported Bloomberg this week. Amit Rajpal, who joined the firm’s Hong Kong office in 2008 as portfolio manager to what are now two global financial-focused funds, said that China was now the largest single-country bullish bet because it will have “no option” but to end monetary tightening soon. “That itself could be a catalyst for the outperformance of Chinese markets and Chinese banks which are very policy driven,” Rajpal was quoted as saying. The two funds are Marshall Wace Global Financials Emerging Growth Fund (up 2.6 per cent through July) and Marshall Wace Global Financials Market-Neutral Fund.
In addition to buying property stocks including China Vanke Co a month ago, Rajpal and his team are also holding shares in three of China’s largest state banks: Bank of China Ltd, China Construction Banking Corp and Agricultural Bank of China Ltd. Apparently, the Chinese stocks being held in both portfolios exceed the amount being shorted by 20 per cent of their combined AUM: hence the bullish sentiment. They are, however, net short financials in the US, Europe and emerging markets such as Brazil. Rajpal prefers buying yuan-denominated shares listed on Shanghai’s stock exchange as opposed to those listed in Hong Kong. Stocks like Bank of China are attractive because they’re trading at five times 2012 estimated earnings and 0.8 times book value – roughly half the five-year average – explained Rajpal.
