2012年9月30日 星期日

Bottom-up approach keeps manager in the picture - SCMP

Uncertain times call for nerves of steel for fund managers who must stay focused on the long term

INVESTORS DRIVEN by broad market trends in recent years will have ridden a roller coaster of emotions - and returns - as sentiment lurched through one crisis after another.

For a fund manager, therefore, the key to long-term outperformance is an ability to hold your nerve and avoid becoming a slave to market sentiment.

'It's fair to say over the last five years that the macro side of things has been very confusing,' said Martin Lau, director of Greater China Equities for First State Investments (HK).

'Investors have been confronted with concerns about the US economy, the Hong Kong property market, global demand, hard landings for China, a revaluation of the yuan, a collapse of the Hong Kong currency peg - the list goes on.'

Troubled and uncertain times they might have been, but few of these crises ever materialised.

Managing the US$194.6 million in assets in the First State Greater China Growth fund and the US$135.1 million in the First State Hong Kong Growth fund was made easier against this background by the 'bottom-up' approach to stock selection.

Over the past three years, the China Fund generated an award-winning 191.6 per cent cumulative return, barely changed from a cumulative return over five years of 191.4 per cent.

The Hong Kong Fund returned investors 157.7 per cent over three years, and 95.1 per cent over five years.

'We keep the macro picture in mind, but don't use that as reason to invest. Sure, if the global economy is doing great, we wouldn't mind buying a company that is sensitive to rates. But in this scenario, it must be particularly well insulated from interest rate risk or present some compelling reason why it would continue to do well even if the economic growth picture changed.'

With such a bottom-up approach to investment decisions, a target company would be closely examined with respect to criteria, such as whether its market share was growing because of a competitive cost structure, or whether it had 'pricing power' and was able to pass on increased costs to its customers.

This long-term focus might mean that stock picking leaves the two funds under Mr Lau's management vulnerable to short-term volatility, but underperforming rivals in quarterly growth reports is something that the investment team is quite content with. If investors wished to cut and run based on a quarterly report, they were welcome to do so, Mr Lau said. The manager's eye will remain fixed on long-term results.

'Those who are slaves to market sentiment get caught in the middle, and for our team it comes down to two things. When the market is performing strongly - as it was in January, for instance - there is a prospect we may underperform because in these circumstances a monkey can outperform by simply picking the highest beta stock.'

Educating First State investors, therefore, was a job for the fund manager.

'The last thing you want is to allow clients to drive what you do every day. Chinese banks, for example, have recently been going up strongly and a manager might be tempted, because of the momentum, to climb aboard,' he said.

'But the way we look at this is from absolute perspective. If you buy Chinese banks today you are increasing absolute risk, and you shouldn't be buying just because others are buying.

'The way to outperform the benchmark peer group over time is to have a keen understanding of what you are doing and to avoid situations where you allow clients or indexes to put you under pressure.'

Investing decisions for the China Fund, for instance, were based on the understanding that consumption would be the key driver of both macroeconomic growth and corporate earnings growth. At about 28 per cent a year, investment growth was unsustainable.

So the China Fund was light on commodities - foregoing the supercharged returns that might have been made over the past 12 months - and had a bias towards consumer stocks.

Meanwhile, concerns over a yuan revaluation triggered a popular aversion to Chinese exporters, based on the argument that a more expensive yuan would price their products out of their export markets.

'Ask people what they want to avoid in China and the most popular answer is avoid exporters,' Mr Lau said. 'But because of our bottom-up approach, we can pick those undervalued stocks up because we investigate to establish whether their share prices have overcompensated for the risks.'

Accordingly, export-oriented stocks are well represented in the China Fund's top holdings, with a prime candidate being Lung Kee.

The choice illuminates that bottom-up process favoured by Mr Lau, since Lung Kee is not an exporter but the domestic Chinese companies to whom it sells its moulds use them to manufacture for the export market. By Mr Lau's estimate, this means that about 70 per cent of its revenues are therefore export-oriented.

It is also a dominant player and hence possesses that elusive pricing power concept.

The Lung Kee price chart shows plenty of short-term volatility. But shut out the noise and the stock moved from a 12-month low of $4.92 to a 12-month high of $6.15. At the time of writing, it was priced at about $5.80.

In Hong Kong, the challenge was the same - taking a long-term view and holding one's nerve as property prices surged 70 per cent from their Asian crisis trough, hauling office rentals in their train.

'That sort of growth is unsustainable and we looked instead to the next driver for Hong Kong earnings,' Mr Lau said.

Management quality tops the list of criteria. This means management must be incentivised with share option schemes and be sympathetic to the concerns of minority shareholders. Over the long term, the key ingredient would be exposure to China.

'Hong Kong is quite a mature economy. But companies here know how to do business and, hopefully, better than some [mainland] Chinese companies, and the future of Hong Kong is in China.'

Indeed, as a fund manager he is already having a little difficulty distinguishing between the two.

2012年9月13日 星期四

15 Sep 2012

Macro view
The Federal Reserve announced bold steps Thursday to stimulate the still-weak US economy and reduce high unemployment, saying it will spend $40 billion a month to buy mortgage-backed securities for long as necessary.

400 p.m. x 12 = 4800 p.m. scale is less than QE1 & QE2

Also, the central bank extended a plan to keep short-term interest rates at record lows - close to zero - through mid-2015, or six months longer than it had planned.

Analysis: + dividend plays. Stock market should reflect the news in this few days. However, the outlook of China fundamental is still being concern, share price may pull-back.

2012年9月9日 星期日

10 Sep 2012

Macro review:

DOW13,306.64 +14.64+0.11%
S&P 5001,437.92 +5.80+0.40%
NASDAQ3,136.42 +0.61+0.02%
TR US INDEX130.22 +0.58+0.45%

10-Year1.62508/15/202299-24 / 1.650-07½ / -0.02621:00

3-Month Libor0.410.440.470.470.34


2012年9月6日 星期四

7 Sep 2012



德拉吉表示,將推出「貨幣直接交易」計劃(monetary outright transactions,MOT),無上限購入三年內到期國債,並放棄優先債權人地位。有關計劃並非獲歐央行管理委員會全體一致贊成,其中有一名成員反對,但重申有關計劃符合歐央行的權限,歐元區的發展進程是不可逆轉的。德拉吉又表示,將會放寬央行貸款擔保標準,終止最低信貸評級門檻要求,讓銀行更容易獲得救助。





2012年9月3日 星期一

4 Sep 2012

Macro review:
US market closed as holiday




% Change

52-WK High

52-WK Low


WTI CRUDE FUTURE (USD/bbl.)96.8600.3900.40%19:53
GOLD 100 OZ FUTR (USD/t oz.)1,694.6007.0000.41%19:55


信 貸 評 級 機 構 穆 迪 投 資 把 歐 盟 的 前 景 評 級 調 低 至 「 負 面 」 , 又 警 告 如 果 德 國 、 法 國 、 英 國 及 荷 蘭 的 主 權 評 級 被 降 低 , 歐 盟 的 AAA 評 級 亦 會 下 調 。
Analysis: 調低至負面已在市場預計之內,評級機構應不會調低歐盟的AAA評級。

歐 洲 央 行 總 裁 德 拉 吉 表 示 , 央 行 購 入 短 期 主 權 債 券 並 不 違 反 歐 盟 規 定 。 他 的 言 論 增 加 市 場 對 央 行 本 周 四 再 推 資 購 買 產 產 計 劃 的 方 能 性 。
外 電 引 述 德 拉 吉 星 期 一 出 席 歐 洲 議 會 閉 門 會 議 上 的 講 話 , 表 示 歐 洲 央 行 在 二 手 市 場 購 入 3 年 或 以 下 年 期 的 債 券 , 帶 來 的 貨 幣 融 資 效 應 非 常 低 。
歐 盟 條 約 禁 止 央 行 購 入 成 員 國 政 府 債 權 , 認 為 向 成 員 國 融 資 會 引 發 通 脹 。 
Analysis: 市場預計周四德拉吉可能公布買債計劃,但預計因時間不足,德拉吉應難有具體計劃公布。而且歐洲央行需要待德國法院下周就買債是否違憲裁決,所以預計不會有具體計劃公布。
Implication: 市場可能會失望,但整體仍要視乎德拉吉言論,是否非常正面。認為向下機會稍高。

AIA: lockups that expire soon, estimate will expire on Sep 4 2012 (180 days from the last
AIA deal) AIG lockup of AIA: 18.6% of total, or 2.2bn shares (US$7.6bn at Aug 31 close) with
no other remaining AIA shares locked up with AIG (or other parties).

Analysis: like AIA’s fundamentals though we acknowledge that near-term share price would depend on AIG’s moves: 1) Favorable growth exposure: Pure AEJ play on consumer finance. 50%+ of new business comes from developing markets, with 40%+ from EMs in ASEAN (where consumer finance is the strongest); 2) Restructuring story still intact: AIA’s new business margin improved from 33% to 42% since 2010, the closest comp Pru Asia also delivered solid improvement (from 45% to 51%), indicating still ample room for catch-up; 3) Strong backbook capital generation of US$2.5bn+/yr more than covers new business strain (2011: US$1.1bn), leaving room for capital management (though not AIA’s current priority).


消息稱,由於雅培在今年3月被CER Research指其生產的喜康寶奶粉,未能達到中國的乳清蛋白比例標準,儘管雅倍已作回應,但聲譽受到一定程度影響,故雅培會較落力去搶回流失的份額。而雅士利及合生元合外資財團胃口,最大考慮是兩者市盈率較雀巢收購惠氏的23.6倍市盈率為低,相對吸引,其中雅士利在二三線城市擁有較強銷售網絡,市佔率逾5%,在外資眼中或較有吸引力。

CKI buys into Australian wind power distribution

Cheung Kong Infrastructure (CKI) plans to buy a power distribution business in Australia, its fourth in that country and the second overseas investment it has unveiled in just over a month.
CKI, the diversified infrastructure company controlled by Li Ka-shing, has formed a 50-50 joint venture with sister firm and partner Power Assets, called Transmission Operations Australia (TOA), to build, own and operate A$33.6 million (HK$268 million) worth of power transmission infrastructure that transports power generated from turbines at a 130-megawatt Mt Mercer wind farm to a power grid in the state of Victoria.


News sources: Appledaily, SCMP, Bloomberg, Reuters

2012年9月2日 星期日

3 Sep 2012

Macro review:
DOW13,090.84 +90.13+0.69%
S&P 5001,406.58 +7.10+0.51%
NASDAQ3,066.96 +18.25+0.60%



10-Year1.62508/15/2022100-22+ / 1.550-22 / -0.07518:17
3-Month Libor0.420.440.470.480.33


Analysis: Market is largely expecting QE3, hence stock market should merely react. Beware the market correction after the realize of QE3.
Portfolio: overweight cash

對於下半年市況,他以一個「亂」字來預測。他說,在經濟放緩的大因素及市場受洋酒衝擊的小因素影響下,下半年經營環境仍然充滿挑戰;不過集團已從產品結構及銷售方式等渠道下了不少苦功,未來更會將業務重心由上海及浙江等沿海地區,平均分配到其他二三線城市。 - <Appledaily>
Action: Take a look of 張裕

內地CPI料轉強 難減息
Analysis: Given lower comp, the downtrend of China CPI comes end. It lows the room for PBOC easing (-ve for property developers?, -ve for staple which margin expansion is largely priced in)
Portfolio: no related stock.

This week Event :

Chart today: