China property, internet plays top stock picks: Old Mutual

April 17, 2015 10:28
Chinese authorities will support the property sector as they seek to shore up the economy, says Diamond Lee of Old Mutual. Photo: EJ Insight

Mainland property counters are top stock market picks as Chinese authorities look set to support the sector to shore up the flagging economy, according to a fund manager with Old Mutual.

"The government has a policy to support the [property] sector. It needs to have stimulus [measures] as the economy is not doing well," said Diamond Lee, Greater China fund manager at Old Mutual, which has US$32.4 billion in assets under management.

Supporting the property sector is the most effective way to lift economic growth, Lee said on Thursday.

His comments came a day after China announced that its GDP growth fell to 7 percent in the first quarter of this year from 7.3 percent in the preceding three months. It marked the slowest growth rate since the first quarter of 2009.

Lee said that internet plays are also good bets for stock pickers as the firms have structural growth of four to five years.

China is unique in a way that it has a large-scale social media company that can be compared with those in the US, he said, probably referring to Tencent Holdings.

In other comments, Lee advised investors to assess the business performance of individual companies to cash in profits at the right time amid the bull-run in the Hong Kong stock market. Last week's scenario of a sharp rally when over a thousand stocks went up is unlikely to repeat, he said.

"At this level, each company and each stock has to be analyzed individually. We cannot see the market as a whole as it has already risen a lot," he said.

Some stocks have risen 50 percent or 60 percent in the latest rally, and are no longer cheap, he said.

The Hong Kong stock market rallied 7.9 percent last week after Chinese authorities allowed mutual funds to invest in Hong Kong stocks through the Shanghai-Hong Kong Stock Connect.

On Thursday, the Hang Seng Index rose 120 points, or 0.44 percent, to close at 27,739 points. Turnover in the local stock market was HK$198.5 billion.

The H-share index, the gauge of mainland companies listed in Hong Kong, surged 248 points, or 1.72 percent, to finish at 14,720.

Lee said trading activity is being driven by huge fund flows, both from the mainland as well as from elsewhere overseas.

Mainland and overseas funds have different preference for stocks. International investors prefer large-cap stocks such as banks, while mainland funds tend to focus on concept plays such as those related to the One Belt, One Road and A-H share arbitrages.

Both kinds of stocks are performing strongly, he noted.

The liquidity trend is expected to continue for a few more weeks, Lee added.

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EJ Insight reporter