EFGAM ventures from China benchmarks to find ‘growth story’ for clients
The ‘China growth story’, which was underpinned by manufacturing exporters in the past but is ever more by local consumption now, is one key reason some managers posit to invest in the region.
Investors in the index have often then been disappointed when the MSCI China index fluctuated, apparently ignoring China’s macro growth story still evident with 7.5% economic expansion.
EFG Asset Management is effectively trying to avoid such a disparity between the two, with funds focused respectively on pan-Asia, and Greater China.
The New Capital Asia Pacific Equity Income fund under Anthony Jordan harvests equity dividend income throughout Asia, to bolster any capital appreciation, and to cushion against any capital losses.
He doubled mainland China exposure from 7% since end of August, and boosted Greater China exposure from about 30% to 42%, as some consumer cyclicals fell in value, thus qualifying for investment for the first time since the fund launched early last year.
Meanwhile, EFGAM’s New Capital China Equity fund under Mansfield Mok (pictured) selects stocks he says are likelier to reflect their country’s underlying economic growth.
Benchmark investors may miss out on this, he says, because at least 50% of assets making up commonly used indices are ‘mature’ companies, well past the peak of their growth, he says.
These include coal/oil producers (comprising 18% of MSCI China), and the country’s largest banks (24%). Telecoms China Mobile (10%) China Unicom (1%) and China Telecom (1%), are further examples, whose business models arguably more resemble utilities.
“These companies are mature when you look at where they are in their life cycle,” Mok says.
To increase the chances his portfolio reflects ‘Chinese growth’, Mok prefers earlier stage companies / sectors, or companies within mature industries yet employing novel practices that help delay or avoid slowing expansion, or contraction, that accompany a company’s ‘mature’ phase. Such stocks have greater ‘growth potential’, he explains.