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  • 03/06/2016

Kai Kong Chay wraps Greater China in his arms-length tactics to win


Uncovering the Hidden Gems Across the Greater China region

It is no exaggeration to say that Greater China’s equity markets started 2016 on an atypical note: massive market falls in the first weeks of January set the stage for a volatile year that was compounded by a number of surprising developments on the political front. Despite these challenges, however, careful stock-picking has bolstered the performance of the Global Dragon Growth Fund, helping the team to achieve the title of ‘BENCHMARK Fund of the Year Award – Best in Class in the Hong Kong Equity category.’

Building From the Bottom Up

When asked about his investment style, fund manager Kai Kong Chay describes a philosophy of peeling back the layers to understand why an investment may or may not work. While the team does place a premium on fundamental, bottom-up research: “We are a bit different in that we always look for catalysts for the companies that we buy.” A solid record and steady sales are always good, but what is essential to Chay and his team is the why: “If we want to purchase a growth company, we look for the drivers of that growth.” Conducting this type research provides a broader picture of a company’s potential long-term success. This is where an astute manager can identify, among other things, whether the market may have mispriced a stock; “maybe where markets were too conservative regarding a stock’s growth expectations, and where there’s a high chance that the company may do better than expected,” explains Chay.

The Merits of Thorough Research

While at first glance this might seem too simple a strategy, it would be a mistake to neglect the benefits of conducting your own thorough research. When asked if he has seen any recent examples of the mispricing mentioned above, Chay offers a quick and definitive “Yes, especially in the Hong Kong-China market.” Moreover, a significant reason for this is a lack of coverage: “There are many opportunities, and many underappreciated mid-cap companies” in the region. “Because they are small (around US$1 billion in terms of market-cap), they are not very well covered by the sell-side brokers. There’s not a lot of information there.”

Therefore, it is the firms that are willing to go out and find that information that are the ones who reap the rewards (or, avoid the falls). “Manulife Asset Management has a wide network of analysts across the Greater China region that helps us to do a lot of fundamental research, talking to suppliers and their customers to understand the business model. As a result, we tend to find a lot of hidden gems.”

Never Become Too Attached

Equities make up the vast majority of assets and tend to hail from emerging, and secondarily, developed Asia. “We believe in a focused, concentrated portfolio and hold around 40 to 60 stocks,” Chay says.” When we want to add a new name, we try to do so by replacing the existing holding that has the least amount of upside. Essentially, our aim is to be disciplined and control the number of stocks to ensure that everything is meaningfully contributing.”

However, the past year presented some unusual challenges for investment managers around the world. In January, the Shanghai Composite crashed, and China’s new circuit breakers were triggered twice in the first week of trading. “2016 was a tough year,” Chay admits. “The Hang Seng Index itself was down 15% by February, then up 10% – a 25% move, then all the way back to zero again. It was very volatile.”

Tried-and-Tested Approach

“As a growth manager,” he says, turning his attention to the fund, “last year was quite tough because there was some style change from growth to value. However, given the catalyst-identification process that we have, we did quite well at identifying those turnaround companies.”

This is the only real antidote to the recent uncertainty in markets; he believes: “Usually when there are bouts of volatility – such as was seen after the Brexit referendum – we stick to our fundamental research. We have a target price; we look at upside potential. I think that is the only way to find opportunity in volatility. You have to make sure that your fundamental research is strong enough to withstand it.”

Making an Active Connection

There appear to be brighter days on the horizon, particularly for investors in the Greater China region: “We are quite confident on the Stock Connect program, especially with Shenzhen added to the picture. We think there’s a lot of opportunity in the Hong Kong market, especially for the domestic Chinese insurers. There is still room to grow.” One benefit of the stock connect program, Chay notes, is greater exposure to non-renminbi equities.

Additionally, “If China’s growth is recovering, things will be better regarding tourists, and financial services. We are relatively more positive on Hong Kong banks, as well.” The Manulife MGF Dragon Growth Fund’s top exposures at the end of 2016 were to the financial and technology sectors. The Fund also invests in consumption stocks that are seeing upgrades from, as Chay puts it, ‘the new middle class.’ This includes services companies, the education sector, and tourism. Underweights are to the real estate and property sectors in both China and Hong Kong. The Fund also has an established relationship with Environmental, Social and Governance (ESG) issues. The Manulife MGF Dragon Growth Fund’s manager offers a practical reason for this: “We tend to look at it in terms of management; if a company is not ethical, it attracts more regulatory issues and could be investigated by the government.”

He leaves us with his bottom-line, somewhat contrarian wisdom, which seems to have served him well: “I think you need to have an enquiring mind: you need to look for what has not been pricing accurately. You need to think outside the box and look at non-consistent stuff. If it is consistent, everybody knows about it. When people are very bearish, you should take the other view. When people are very bullish, you should be careful. I always ask myself to think differently.” BM

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發掘滄海遺珠

2016年大中華區股票市場詭異莫測,這說法毫不誇張:一月開始的幾星期就出現大跌市,緊隨着的是不明的政局發展,使整年股票巿場非常波動。儘管宏利環球基金-巨龍增長基金面對總總挑戰,但只要謹慎選股便能支撐著成長基金的表現,並協助該團隊奪取了「2016《指標》年度基金大獎——香港股票類別同級最佳」的殊榮。

知微見著 立竿見影

問到基金經理謝企剛的投資風格,他形容,要知道投資項目是否可行,就必須抽絲剝繭。基金管理團隊強調由下而上的方法,從公司角度研究:「我們採取與眾不同的方式,買入股票前會先找出公司的核心增長動力。」一般股票買賣都是追求公司穩定實在的表現,但謝與其基金管理團隊認為,了解增長原因更為重要:「要買入增長型公司的股票,就必須先找出公司的增長動力。」而該研究能為公司提供更宏觀的角度審視潛在的長期盈利 。這也證明了精明的基金經理,為何總能在眾多因素中找出巿場中被低估的股票;他解釋:「市場對股票的增長預期趨於保守,而事實上被低估的公司表現可能比預期好。」

深入研究 成績斐然

此策略聽起來很簡單,但自行深入研究的優點往往被忽略。問及最近市場有否出現股票估價錯誤的例子時,謝企剛毫不猶疑地表示:「有,特別在中港市場。」而他們缺乏市場關注是重要的原因。「其實中港市場蘊藏大量機會,還有不少巿值被低估的中型公司」。他補充:「因為這些公司的市值都很小(市值約10億美元),在缺乏資訊的情況下,未能吸引賣方股票經紀關注。」

總括而言,投資公司只要能擴大巿場版圖,網羅更多巿場資訊的話,就能確保可觀的投資回報(或至少立於不敗之地)。謝企剛總結:「宏利資產管理公司在大中華地區擁有龐大的分析員網絡,協助我們進行大量基本分析,與供應商和其公司客戶交流,了解商業模式,我們亦因此而在巿場中找到不少滄海遺珠。」

恪守原則 靈活變通

基金組合當中,股票往往佔絕大多數,而且主要來自新興國家,其次是亞洲區的發達國家。謝企剛表示:「我們的投資組合較為集中,有明確焦點,現時持有大約40至60個股票。」他指出,「每當我們新增一隻股票到基金組合,就會換走組合中增長最小的股票。而目標是有紀律地的控制持股量,以確保投資回報。」

然而,過去一年,世界各地的投資經理均面對股巿異動的挑戰,一月份上證指數意外下瀉,A股巿場亦在第一周觸發了兩次熔斷機制。謝企剛承認:「2016年是艱難的一年,恆生指數在二月下跌15%後再上升10% ,前後波幅達25%,之後又打回原形,表現非常反覆。」

反覆試驗 穩中求勝

從基金角度分析,謝企剛表示:「作為增長型基金經理,我們去年面臨重重挑戰,因為我們將投資風格從增長型投資,調整為價值型投資,然而我們了鎖定公司核心增長動力,成功找出盈利大增的公司股票。」

只有掌握公司核心增長動力,才能真正在最近的市場動盪中突圍而出。謝企剛認為:「就算巿場反覆波動,像英國脫歐公投結果公佈後,市場出現的大幅波動,我們的投資研究會堅持基本分析。我們會設定目標價,研究股票的上升潛力。我認為基本分析要做到滴水不漏,才能助我們在巿場波動中把握先機。」

主動出擊 領先同儕

巿場上將出現更多投資機會,尤其是大中華地區巿場,謝企剛說:「我們對中港兩地股巿互聯互通機制試點計劃充滿信心,特別在『深港通』計劃啟動之後。香港市場有無窮機會,尤其是對國內保險公司而言,仍有增長空間。股巿互聯互通計劃的其中一個裨益,就是帶來有更多接觸非人民幣結算股票的機會。」

謝企剛補充:「中國經濟的復蘇將讓旅遊和金融服務行業得益不淺,而我們對香港銀行業前景亦相對樂觀。」在2016年年底,宏利環球基金- 巨龍增長基金主要由金融和科技股組成;消費股因「新中產階級」冒起獲納入組合中,當中包括服務、教育及旅遊業;而調低中港兩地的地產股的比重。另外,基金一早已關注環境、社會和治理事項。他指出實際的原因:「我們比較重視管理;一間公司沒有道德操守,只會衍生更多監管問題並招致政府調查。」

最後,謝企剛分享了沿用多年的投資策略,可說是逆向投資思維:「我認為投資者需要有探究精神,發掘價格被低估的股票,更要突破傳統思考,留意相違之處。要是股價與價值相符,就已人所皆知。當大多數人都看淡大市時,你便應該從另一個角度看;當大眾都一致看好股市時,你便要格外留神。我時常提醒自己要保持逆向思考。」 BM

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