What Will China's Mutual Funds Buy?

What Will China’s $1 Trillion Mutual Funds Buy In Hong Kong

Based on the latest quarterly data from mutual funds that use the QDII quota, Chinese mutual funds seem to like themes. They like healthcare, clean energy and brokers, as well as state-owned enterprises that have the reform theme. Tencent (700.Hong Kong), Ping An Insurance (2318.Hong Kong) and China Mobile (CHL) show up repeatedly in the top 10 active QDII equity funds.

Interestingly, Chinese mutual funds do not care for “unique” plays. Their top 10 holdings have no exposure to Macau.

Their holdings outside of Hong Kong are also interesting. The top holding of the 8.4 billion yuan ChinaAMC Global Equities is IMAX Corp. (IMAX) IMAX is very popular in China. The 8.8 billion yuan China Southern Global Equities have large exposures to WisdomTree Europe Hedged Equity Fund (HEDJ) and Deutsche X-Trackers MSCI Europe (DBEU). The 7 billion yuan CIFM Asia-Pacific Equities likes Samsung Electronics (SSNLF) and TSMC (TSM).

Brand names such as Want Want (0151), Chow Tai Fook (1929) and Mengniu (2319) and plenty more will also be of interest.

Guangdong slows; jewellery sales slump

Friday morning pre-GDP news:

Guangdong growth alert for mainland

Guangdong Governor Zhu Xiaodan on Wednesday conceded that the provincial economy grew a "weaker than expected" 7.4 per cent in the first six months of the year. Exports grew only 6.9 per cent, a slowdown which is already spilling into the second half. Zhu told his subordinates to have "a higher level of crisis awareness" as other key economic indicators, such as fixed asset investment, retail sales, and the government's fiscal revenue were worse than anticipated and were below national averages.

Guangdong is one of the faster growing provinces, although the article quotes predictions of 7.7% GDP growth for all of China in Q2.

Elsewhere, I warned that China has a gold bubble because investors are very speculative, treating the metal like a hot stock.
Sales decline hits jeweller's shares

Chow Tai Fook said in a filing on Wednesday night that same-store sales in its Hong Kong and Macau stores dropped 1 per cent for the three months to June, despite a 5 per cent increase in volume. This is a sharp decline compared with the 48 per cent growth in same-store sales recorded for the fiscal year to March.

"While the weakness may not be totally unexpected, the reported sales growth and same-store growth were still notably below the market and our estimates," said Catherine Lim, an analyst with Citi Research.

...A spokeswoman at the Hong Kong Retail Management Association said mainland consumers have cut spending on jewellery, apparel and cosmetics in their shopping trips to Hong Kong this year.

To deal with the challenging market environment, Cheng said the company had adjusted the product mix to meet consumer demand.

Chow Tai Fook has expanded aggressively across the border in recent years, which has strained its cash flow.

The retailer received net proceeds of HK$15.4 billion in its initial public offering but said it held only HK$10 billion in cash at the end of March.

Chinese shares pummeled in Hong Kong

Investors are pricing in a much slower Chinese economy as disappointing economic numbers come in and today was the worst one-day decline in the past three months. The Hang Seng China Enterprises Index tracks H-shares in Hong Kong. Today, the HSCE was knocked for a 3.4% loss and was down as much as 3.7% late in the day. Beijing Capital International Airport (0694) was hit for a 7.1% loss. Jianxi Copper (0358) fell 6.0%; Sinofert (0297) lost 5.9%; China Minsheng Bank (1988) declined 6.2%; Sands China (1928) slid 4.9%; CITIC (6030) tumbled 5.7%; and Chow Tai Fook (1929) plunged 9.6%.

In the real estate sector, Sino-Ocean (3377) sank 7.5%; Guangzhou R&F (2777) fell 6.6%; China Resources Land (1109) declined 6.1%; SOHO China (0410) lost 4.1%. On the Mainland, Vanke (000002.SZ) fell 3.4%, well ahead of the 1.2% drop in the Shanghai Composite.

China loves gold too!

For more mainland couples, gold delivers message 'I love you' best

Big jewellery retailers on the mainland say sales of lovers' rings, necklaces and pendants made of gold and platinum have risen significantly ahead of Valentine's Day.

A Cai Bai Jewellery salesman said revenue had surged nearly 60 per cent over the past few days, and most of the customers were in their twenties and thirties.

A Chow Sang Sang staffer said the number of customers patronising their outlets in Beijing had increased by more than a third.

Investors can buy shares of Chinese jewelry stores. Luk Fook (0590.HK) has seen its shares rally sharply the past two years along with other luxury goods producers. Chow Tai Fook (1929.HK) IPO'd in December and has traded similarly to Luk Fook since hitting the market.