Yahoo Finance Man Group Fund Expects China Market Rebound With Policy Boost
(Bloomberg) -- An asset manager at Man Group, the world’s biggest publicly traded hedge fund firm, expects that the July meeting of China’s top leaders will roll out measures aimed at boosting consumption to revive the country’s sluggish stock market.
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“The market could do extremely well in that environment,” said Andrew Swan, its head of Asia ex-Japan equities and discretionary, based in Australia. He has an overweight exposure to China, anticipating additional stimulus to boost the economy.
A policy shift in China’s closely-watched economic meeting will likely provide a fresh catalyst for the nation’s stocks, which have lost momentum since a mid-May peak. An index of stocks listed in Shanghai erased its year-to-date gains amid growing concerns about the state of the nation’s economy.
It is “a very important meeting, because my sense is that China needs to evolve from where it is today,” Swan said in an interview. “Deflationary forces are already in the economy. We expect policymakers will want to address that.”
Swan’s optimism about the third plenum is shared by JPMorgan Chase & Co. and Invesco Ltd., which also expect a boost for stocks from the closed-door conclave where leaders map out long-term economic plans and signal policy shifts.
Meanwhile, Morgan Stanley and others remain cautious amid earnings downgrades, weak consumer demand, property woes and recent policy disappointments.
Despite his optimism, Swan notes that his team remains vigilant as the Chinese economy and corporate earnings are “not particularly strong.”
The $135 million MAN GLG Asia ex-Japan Equity fund, managed by Swan, has beaten 89% of its peers over the past three years, according to data compiled by Bloomberg. Earlier this year, his team turned overweight on China while reducing exposure to Indonesia and the Philippines, anticipating higher interest rates to persist.
Swan expects that once the Federal Reserve cuts rates, it will create a “spring-loaded” effect, allowing Indonesia and the Philippines to reduce their rates. That would boost their stock markets, improve long-term outlook and ease financial conditions, he said.
The fund manager favors the technology sector, expecting artificial intelligence-linked demand to create opportunities for semiconductor companies and hardware devices manufacturers.
Among bearish bets, energy is less favored due to uncertain oil price trends, while defensives and consumer staples are less attractive because of weak demand.
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