A top-ranked investor shrugs off warnings
(Bloomberg)Updated: 2007-06-15 10:39 Alan Greenspan and Li Ka-shing say that China's markets are headed for a collapse. Liu Tianjun, who runs the best-performing fund in China, begs to differ.
Liu increased stock holdings in Fund Taihe, his 5.31 billion yuan, or $696 million, fund, even during a 16 percent, four-day rout that started May 30. He used up almost all his cash to buy pharmaceutical, engineering and insurance companies because, he said, their share prices will more than double in the next three years.
The period was "a great opportunity to buy," Liu, who is 29, said in an interview in Beijing, where he runs the fund for Harvest Fund Management. "After bubbles burst, they eventually have to rise, don't they?"
He was right, at least for now. The CSI 300 index has almost reclaimed its record and has doubled this year, making it the best major stock benchmark in the world, according to data compiled by Bloomberg.
Taihe, which Liu says does not have a benchmark, has posted a 338 percent return in the past 12 months, the best among 601 China-focused funds tracked by Bloomberg. The Shanghai A-Share Stock Price index, which tracks yuan-denominated stocks, has returned 172 percent in the period; the CSI index has tripled.
Contributing to that performance have been Liu's investments in Hudong Heavy Machinery, China's biggest maker of ship engines, whose shares have surged almost sixfold in the past year, and Shandong Dong-E E-Jiao, which makes traditional Chinese medicines and health food. It has more than tripled in the period.
Taihe can invest only in Chinese A shares. The fund holds up to 80 percent of its assets in equities and keeps around 3 percent in cash. Up to 20 percent is invested in bonds.
Liu said he has been trimming steelmakers, whose dividends he is finding less attractive. He declined to name specific stocks because of restrictions on disclosure of holdings before the release of the fund's quarterly report.
Health care and engineering companies "have very good fundamentals," Liu said. "They have steady cash flow. Insurers have stable premiums."
The CSI index jumped 17 percent in the seven days ending Wednesday. It had fallen after the government tripled the tax on securities on May 29.Greenspan, the former U.S. Federal Reserve chairman, and Li, the Hong Kong magnate, warned in May of a sharp drop in share prices, comments that helped fuel the end-of-month plunge.
Liu worked as a research analyst at China Merchants Securities before joining Harvest in April 2003. Harvest, 19.5 percent owned by Deutsche Asset Management, is China's biggest fund manager in terms of market share, according to Shanghai-based Z-Ben Advisors.| 1 | 2 |  |
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