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Pioneering Value Investing in Greater China


PIONEERING VALUE INVESTING IN GREATER CHINA

louis-so

Louis So
Deputy Chairman and
Co-Chief Investment Officer
Value Partners

From a boutique firm to one of Asia’s largest asset managers, Value Partners has come a long way since its establishment in 1993. In the increasingly volatile Greater China market, the home-grown asset manager has demonstrated that perseverance and discipline – the doctrines of value investing – are often rewarded in the investment world. Louis So, Deputy Chairman and Co-Chief Investment Officer at Value Partners – and this year’s winner of the BENCHMARK Outstanding Manager, Greater China Equity – shared with us his disciplined investment approach.

BENCHMARK (BM): Congratulations on winning this hard-earned title, Louis! Your flagship fund boasts a long-term track record. How does your 3Rs investment philosophy help investors add value and preserve capital?
Louis So (LS): Thank you for this honor! As a long-term investor in Greater China, Value Partners has navigated through many volatile periods. Our long-standing presence would not be possible without our disciplined, bottom-up approach to investing, which can be summarized by 3Rs: Look for the Right Business that is run by the Right People and is at the Right Price.
The 3R-philosophy allows us to generate alpha by identifying winners through intensive on-the-ground research. Every year, our team conducts over 2,500 company visits and research meetings. The team’s internally generated research covers thousands of stocks in Asia-Pacific, but only less than 2% of the top ideas make it into our portfolios. We hunt for companies with sound fundamentals and discounted valuations, and we are on constant lookout for contrarian ideas with depressed valuations.
BM: Making the right judgment is central to your concentrated approach to investing, and such investment acumen is often a result of the investment personnel’s experience. Can you tell us more about your team?
LS: Certainly. We have one of the best investment teams in Asia, with over 60 onthe-ground investment professionals in Hong Kong, mainland China, Singapore, and London, with a special focus on the Greater China market. The members of the experienced and close-knit investment team have an average of 17 years of industry experience and 9 years at Value Partners. Most team members joined the firm at the beginning of their investment careers. The entire investment team is responsible for stock research, with constant information sharing to ensure efficient and effective coverage of our investment universe.
BM: As an investment expert in Greater China, how much more potential do you see in China’s consumption upgrade story?
LS: We expect consumption upgrade to remain a core investment theme in China. As China’s growth structure continues to shift from acting as the “world’s factory” to being a consumption-driven economy, we believe consumption will remain a growth pillar in China. Our position is supported by the country’s continued urbanization and steady wage growth. The sector beneficiaries of this trend are broad and include home appliance companies, white liquor manufacturers, e-commerce providers, and technology hardware makers. However, to select quality names, strict discipline is required. Therefore, we believe our strict adherence to value investing principles will be the key to success.
BM: Besides the consumption upgrade story, where else do you see opportunities in China? And what kinds of risks should we watch for?
LS: We see opportunities in two burgeoning trends in China: corporate consolidation and increasing R&D expenditure.
Corporate consolidation is gathering pace across various industries in China on the back of the government’s call for stepped up supply-side reforms, which include closing down “zombie” firms. Industry consolidation is helping large companies increase their market share and strengthen their pricing power. Over the past five years, the market share of industry leaders has increased noticeably. For instance, the combined market share of the top five air conditioning manufacturers in China has expanded by more than 12% between 2012 and 2017, totaling more than 80%. This growth is leading to stronger pricing power in consolidated enterprises, which bodes well for corporate profitability.
Meanwhile, China’s R&D expenditure is increasing at a faster pace than that of other countries. With a deep talent pool and policy supports, China is poised for more technological breakthroughs in areas such as high-speed rail, automation, e-commerce, and artificial intelligence.
On the contrary, the biggest risks in China stem from government policies, such as financial deleveraging, tighter controls on the housing market, and anti-pollution initiatives. While the pace of policy execution will inevitably affect the market, we believe that the authorities will refrain from proceeding with these policy changes too forcefully in order to avoid an abrupt slowdown in economic growth. BM

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開創大中華區價值投資

louis-so

副主席兼聯席
首席投資總監蘇俊祺
惠理集團

一家精品公司演變成亞洲其中一間最大型的資產管理公司,惠理自1993 成立以來,已走過漫長道路。於愈見波動的大中華市場,惠理引證了只要堅持毅力和紀律等價值投資的大原則,終會獲得回報。於本年度獲得《指標》大中華股票傑出基金經理的惠理集團副主席兼聯席首席投資總監蘇俊祺(Louis So),與我們分享其嚴謹的投資方針。

《指標》: Louis,先恭喜你力壓群雄!你的旗艦基金屢戰屢勝,可否談談你的「3R」投資哲學,如何協助投資者守穩資產及為資產增值?
蘇俊祺: 感謝授予我此項榮耀!作為大中華區的長期投資者,惠理見證了不少動盪的時刻。若果沒有嚴謹自下而上的投資方針,我們絕對不能維持至今,此理念可以「3R」來歸納-以正確的人選(Right People),於正確的價格( Right Price),管理正確的業務( Right Business)。
此「3R」哲學是以實地研究為依歸,令我們可從中辨識盈利高於基准收益的勝者。我們的團隊每年實地考察,探訪逾2,500間公司並進行研究會議。團隊於內部的研究更包羅了數千隻於亞太區的股票,最終只有少於百分之二能被納入我們的投資組合。我們專門網羅擁有健全基本面而市值又被低估的股票,更不時運用逆向思維搜尋估值受壓的公司。
《指標》: 你們的決策乃根據高度集中的投資方針,此等投資觸角,多靠個人經驗,可否透露更多關於你的團隊?
蘇俊祺:當然可以。我們擁有於亞洲其中一支最佳的團隊,成員包括逾60 位來自香港、內地、新加坡及倫敦並專注大中華市場的專才。而每位成員平均有17 年的業內經驗及9年效力惠理的經驗。大部分成員於投身職場時,已加入我們。他們的工作範圍包括研究股票,更不時分享有關資訊,確保有效率及有效益地覆蓋整個投資領域。
《指標》: 作為大中華區的投資專家,你怎樣看內地消費升級所帶來的潛力?
蘇俊祺:我們期望消費升級繼續成為內地的主要投資議題。內地的經濟架構由「世界工廠」轉變為消費主導的經濟體,我們相信於都市化及薪金穩定增長的支持下,消費仍會是內地的發展支柱。此趨勢的受益行業甚廣,包括家電、白酒商、電子商貿提供者以及科技硬件生產商,他們均可於此升級週期中得益。可是,要選擇有質素的公司,必須要有嚴謹的規律。故此,我們嚴格遵守價值投資的原則,將是成功的關鍵。
《指標》: 除了消費升級之外,你在內地哪方面發掘到機遇?我們要留意哪方面的風險?
蘇俊祺:我們看到內地兩個新興趨勢:企業合併及增加研究及發展的開支。
於政府加強供應側改革的前題下,不少行業均於企業合併方面加快步伐,當中包括清除「喪屍公司」。業界合併有利大機構增加市場佔有率及增強定價能力。於過去五年,行業領導者的市場佔有率明顯增加。舉個例子,國內頭五位空調製造者的總市場佔有率,於2012 至2017 年期增加了12個百分點,現時市場佔有率已逾八成。這增強了合併企業的定價能力,對公司盈利能力有裨益。
此外,內地研究及發展的開支比其他國家的增長率更為迅速。於政策及人材的支持下,內地於高速鐵路、自動化、電子商貿及人工智能的科技突破將更為顯著。
相反,內地最大的風險源於政府政策,例如金融去槓桿化、於房產市場及反污染措施上收緊管制。雖然政策執行的步伐無可避免地影響市場,我們相信政府推動這些政策改革時不會過於強硬,以避免經濟增長突然放緩。BM

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