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Turning Risks and Opportunities Into Results


TURNING RISKS AND OPPORTUNITIES INTO RESULTS

Kai Kong Chay

Kai Kong Chay
Managing Director,
Senior Portfolio Manager of
Greater China Equities
Manulife Asset Management

The Hong Kong market experienced a bumper year in 2017, and so did Manulife Asset Management. The investment powerhouse successfully captured the year-long winning streak of Hong Kong stocks and created tremendous value for investors. We seized the chance to talk to Kai Kong Chay, Managing Director, Senior Portfolio Manager of Greater China Equities, about his allocation strategy in the city’s elusive investment landscape.

BENCHMARK (BM): Your flagship Manulife Dragon Growth Fund delivered stellar performance last year. After the significant rally, do you think the high valuations of your key holdings are still reasonable?
Kai Kong Chay (KK): Indeed, we’re well aware of the elevated valuations of our major holdings, especially the two Chinese Internet stocks in our top-10 list. However, let’s not forget that the expanding earnings multiples are, in fact, built on strong business fundamentals. For example, the leading Chinese Internet companies are employing AI to improve precision in customer targeting, thus drawing in more advertising dollars to their platforms. Furthermore, according to eMarketer, iResearch, and Morgan Stanley Research, as of January 2018, China’s social media now accounts for a mere 9% of the nation’s digital advertising spending, which is significantly lower than the 25% in the US. This allows further room for the Internet giants to monetize their social media offerings. Given their enormous growth potential, we believe that the Internet stocks’ current valuations are justified.
Having said that, to abide by our selling disciplines, we don’t rule out taking profit on some of our holdings when their prices hit their targets. After all, our investment philosophy is centered on “seeking growth at a reasonable price.” For a stock to be included in our portfolio, it must beat the market’s average earnings growth and have valuations at a decent and not expensive level.
BM: A deeper look at your fund’s sector allocation revealed a cautious stance on financials. Why?
KK: We are underweighting the financial sector because of a mixed bag of concerns. From the perspective of subsectors, we approach banks, brokers, and property developers with caution.
In China’s banking sector, the tightening interbank funding and the subsequent increase in funding costs, leads to the narrowing of net interest margin in small sized banks, which highlights our cautious views on banks. In the property space, policy tightening has ushered in a consolidation in the industry, helping large developers gain market shares. While this bodes well for their profitability, deleveraging may again constitute a drag. Lastly, we expect Chinese brokers to stay under pressure as keener competition squeezes margin. Also, the plateauing trading volume in Asia is not working in their favor, either. Therefore, a watchful eye is warranted.
BM: Let’s talk politics. What kinds of political risks should we be aware of in China this year?
KK: As the dust of the leadership reshuffle has settled after the 19th Party Congress, we expect an accelerated pace of economic reforms in China. From the authority’s rhetoric, it is clear that deleveraging and financial risk controls will be China’s policy focus this year. Considering that the growth of national debt is still outstripping GDP, we believe that stepped-up risk controls are necessary for China to herald in a healthier, higher quality growth, although they may weigh on the market in the short term.
BM: You just mentioned China’s reform. What are your views on the state-owned enterprise (SOE) reform?
KK: The SOE reform is a multi-year process whose merits are yet to be fully priced in. That’s why uncovering profit opportunities in China’s reform story remains our key focus. In the recent years, we have been seeing a widening scope of SOE reform initiatives. In particular, streamlining corporate structures and disposing periphery businesses to parents or affiliated companies – so that SOEs can redirect their attention to their core businesses – are becoming the focal points of the reform. Some of the reform initiatives are nearing harvest time, as evidenced by the marked improvement in earnings. We’re definitely witnessing more opportunities engendered by the SOE reform today than a few years ago.
BM: Besides China’s reform progress, the US rate hike is also among the chief concerns in the Hong Kong market. Do you think these worries are rational?
KK: Yes, we share investors’ worries that interest rate hikes may hinder the financial health of high-gearing companies and companies heavily investing in US debt. Moreover, high-dividend plays, which were once well sought after in the low interest rate environment, are lacking momentum, too. Sensing the looming rate hike cycle, we have already trimmed our exposures to these sectors.
BM: Lastly, can you tell us what other external uncertainties are under your radar?
KK: In terms of external risks, the policy direction of the US administration remains the biggest wild card. In the early months of Trump’s presidency, the market worried that the new president may slap heavy tariffs on China, and these worries are now returning. To start with, a steep tariff on imports of washing machines and solar panels has been imposed, and investors are jittered by potential retaliatory actions by China. While the impact of such events shouldn’t be overplayed, we will continue to closely monitor how the escalating trade dispute unfolds. BM

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化風險及機遇為成果

Kai Kong Chay

大中華區股票投資部
高級組合經理謝企剛
宏利資產管理

2017 是香港股票市場的豐收年, 對於宏利資產管理亦然。此家投資巨擘成功跟隨港股的連三升勢,為投資者締造龐大收益。我們邀請到宏利資產管理大中華區股票投資部高級組合經理謝企剛,深入探討他於不明朗前景下的投資策略。

《指標》:你的旗艦基金「宏利環球基金-巨龍增長基金」去年表現視同儕,於股市屢創新高後,你是否認為基金所持主要股份的高估值仍然可以持續?
謝企剛:事實上,我們注意到基金主要持股的估值上升,特別是位列前十的兩間國內科網公司。不要忘記,盈利倍數的擴大乃建基於強大的業務基礎。例如,多間內地龍頭科網公司正運用人工智能(AI),令主要客戶群的定位更精準,從而令他們的平台引入更多廣告收益。此外,根據eMarketer、iResearch及摩根士丹利的研究,截至2018 年1 月,國內的社交媒體僅佔全國數碼宣傳開支的9%,相比起美國的25%,可謂大相徑庭。由此可見國內的科網龍頭公司,仍有利用社交媒體平台增加收益的空間。鑑於它們的可觀增長潛力,我們相信科網股目前的估值絕對合理。
話雖如此,秉承一向的股票出售原則,我們不排除售出部分已達到目標價的股份。畢竟我們的投資哲學是忠於「在合理價格上尋求增長」的理念,當決定將某隻股份加入投資組合時,該股份必須超過市場的平均盈利增長水平;另一方面,該股份的估值也應達到合理而不會過高的水平。
《指標》:深入了解你的基金組合的行業分配後,你明顯對金融業持謹慎態度,原因何在?
謝企剛:我們減持金融業股份乃始於多重憂慮。就行業界別的觀點,我們對銀行、經紀及地產發展商有所保留。
於國內銀行業方面,收緊銀行資金流以及隨之而來的資金成本上升,導致小型銀行淨息差縮小,種種原因都構成我們對銀行業持觀望態度。於房地產方面,政策收緊加快了行業整合的步伐,令大型地產商能夠擴大市場佔有率。雖然這有助增加他們的收入來源,但去槓桿化措施或有機會構成拖累。最後,我們期望內地經紀保持拼搏心態,因為有激烈的競爭才能創造利潤。此外,亞洲的平穩交易量對他們亦無利可言,故此保持警惕實屬必要。
《指標》:不妨談談政治。內地哪些政治風險,我們於今年必須提高警覺?
謝企剛:於第十九屆三中全會落幕後,領導層重整已塵埃落定,我們期望內地的經濟改革步伐會加快。從領導層觀點而言,去桿杆化及財務風險調控肯定是內地的政改焦點。考慮到目前國債的增長已超越國內生產總值,為創造更健康及高質的增長,我們相信風險管理會進一步加強,雖然此舉於短期內可能會影響股票市場。
《指標》:你剛提到內地的改革,你怎樣看國有企業的改革?
謝企剛:改革國有企業不是一朝一夕的事情,成果暫時尚未完全呈現。正因如此,內地改革所帶來的利潤發掘機會,仍值得高度關注。近年,我們見證國有企業改革正不斷擴大,尤其是精簡企業架構並將外圍業務委托予子公司或附屬公司,令國有企業可專注其核心業務,此亦是改革的另一重點。國有企業的收益明顯改善,足以證明部分改革項目已接近收成期,相比起數年前,我們今天見證着更多因改革國有企業而衍生的機遇。
《指標》:除了中國的改革進度,美國加息仍然是纏擾香港市場的一大因素。你認為此等憂慮是否理智?
謝企剛:的確,投資者憂慮加息,有可能影響高負債公司及巨額投資美國國債公司的財政健康。此外,於低息環境下的高股息投資工具亦勢頭漸失,於加息週期氣氛的籠罩下,我們已經減持相關行業。
《指標》:最後,可否透露你正密切注視的外圍不明朗因素?
謝企剛:就外圍風險而言,美國政府的政策方針仍然是目前最大的不明朗因素。於特朗普上任初期,市場曾擔心新任政府會對華大幅調高關稅,此等憂慮近日捲土重來。簡單來說,若洗衣機、太陽能板等進口貨品被徵收高額關稅,投資者或會擔心中國採取報復行動而有所卻步。雖然此等事件不宜過份猜測,我們仍會繼續密切注視潛在的貿易糾紛對大市的影響。BM

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