Translated by Andrew Vanburen from a Chinese-language piece in 21 CN
CHINA AMC’S WANG YAWEI, the high-flying young investment guru who often has shareholders hanging on his every word, says he is “optimistic” on the prospects for China’s stock markets this year.
He said that with the benchmark Shanghai Composite Index already adding some 15% since the beginning of the year, easing credit and other factors should continue to provide upside support in 2012.
“Looking at the market from the point of view of its accumulated rise year-to-date as well as the upcoming national leadership transition in Beijing, it is somewhat difficult to get anything resembling long-term clear visibility on its directional trend going forward.
“I think a lot of the uptrend since the start of the year can be attributed to seasonal factors,” Mr. Wang said, adding that this didn’t mean the current mini-bull was a one-off event, and could turn out to be relatively sustainable.
These seasonal factors could be summarized by three distinct upside drivers.
“The first is the soft concept of sentiment, or more specifically – positive reinforcement – which is that when something feels good, you want to continue to get the same sensation which gives a mini-bull run staying power.”
He said that with most regions of the world more or less already extricating themselves from the financial crisis that began in 2008, sentiment sometimes rides on this reality for an extended timeframe.
“Chinese generally feel like they truly dodged a bullet from the last downturn – still ongoing in some places. And they have some rather stable and robust GDP growth figures over the past four years to help nurture this sentiment. And I am optimistic this sentiment can provide further lift this year.”
“And this foundation of relative optimism will help stabilize the market this year, likely providing a level of support through with the benchmark index will have a great deal of resistance falling through to any noticeable extent.”
Macroeconomic policy from the halls of power in the nation’s capital has also provided uplift to China’s capital markets in Shanghai and Shenzhen.
“Government support so far this year, especially in the form or the recent credit easing move, has also boosted investor confidence. But this did not come as a total surprise as every year before the annual massive legislative gathering in Beijing, the Central Bank almost always loosens up lending to varying degrees,” Mr. Wang said.
Thirdly, investor sentiment this year has been buoyed by daily trading turnover being on the ascent.
“This is related to the reality – or perception thereof – of an easing credit environment and an absence of liquidity anxiety thanks to the recent RRR (reserve requirement ratio) cut by half a percentage point,” he added.
Mr. Wang, who holds an MA in economics, joined China AMC in 1998.
He is now Assistant President and Fund Manager of the China AMC Large Cap Select Fund.
In 2010, China AMC was the largest fund management company in China with total assets under management (AUM) of over 300 billion yuan and more than 13 million investors.
According to data compiled by Bloomberg, Wang’s fund has beaten 97% of rivals between 2006 and 2011. In 2010, it returned 24%, after a 116% jump the previous year. In 2008, the fund fell 36% as the Shanghai Composite index plunged 65%.
Mr. Wang's fund claims on its website to invest in “undervalued A-shares with good prospects.”
He must be doing something right because a typical example of his Select Fund’s darling picks is Anhui Sierte Fertilizer (SZA: 002538), which has risen 21% in the past two weeks.
Wang has also been all-aboard the property express. Last year, he increased the proportion of real-estate shares in fund to 19% from 13%, while cutting holdings of banks and insurers to 20% from 24%.
Wang wasn’t the only professional willing to throw his hat into the “bull” ring.
Renowned market commentator Hou Ning is also decidedly upbeat on things financial this year.
“This current uptrend is no one-time blip, but could regroup and re-strengthen several times again. Judging by recent market trends, I don’t see the Shanghai Composite Index breaking through the 2,800 or 2,900 level as being much of a challenge.
“And if things go relatively smooth on the macropolicy, global economy and stability fronts, I think we could even be staring the 5,000 level in the face within three years,” Hou said.