The second half of 2011 will be tougher for the mainland's property market, said Anthony Bolton, star fund manager for China equities at UK-based Fidelity International. And on China equity plays, Bolton said he isn't very keen at the moment on either mainland banks or property developers.

Speaking at a media briefing in Hong Kong on Monday, Bolton said that he still expects 2011 to be "a bull year" for China's equity market. But he was far less bullish on developers and banking stocks compared with consumer and service-related plays.

Bolton said that he is "biased" against developers and favors investment companies instead.

"The second half of the year will be more difficult for China's property market," he said. According to Bolton, the fund he manages currently has "a minimum exposure to developers", a position he said he is "happy with".

However, although Bolton has largely played down property stocks, fund managers at Franklin Templeton are advising buying Chinese developers. This is despite central government tightening measures, as they advise that investors can take advantage of "low valuations".

Housing prices across China have so far continued their upward march despite central government measures to cool down the market including imposing property taxes in some cities and raising the minimum down payment for second-home buyers.

Yet, the momentum recently has shown signs of slowing. The latest survey by the National Bureau of Statistic finds the country's home price growth in March is easing from February levels.

Home prices in Beijing rose 4.9 percent in March from a year earlier, after a 6.8 percent increase in February.

In Shanghai, prices were up 1.7 percent, down from the 2.3 percent gain recorded for February.

Besides developers, Bolton is also unenthusiastic about mainland financial stocks. "I don't like financial services although valuations remain attractive," he said.

Mainland banking stocks are in particular unappealing given various "uncertainties", he added.

For one thing, it is not yet clear how the central bank will go about setting capital requirements in the medium term, Bolton noted.

And whether there will be a deregulation of interest rates remains to be seen. But if it happens, the result will be thinner margins for the mainland banking sector as a whole, according to Bolton, who favors Hong Kong banks instead.

The world's big financial institutions including JP Morgan and Barclays Wealth recommended Greater China financial stocks in their latest assessment of the global investment outlook, the valuations of which they said are attractive at the moment.

And like Bolton, these big banks are keen to buy Greater China as they react to the country's interest rate hikes, the latest of which occurred on April 5.

Credit Suisse Group AG earlier boosted its 12-month forecast for the Hang Seng China Enterprises Index, and HSBC Holdings Plc also raised its rating on China to "overweight".

China Daily

(HK Edition 04/19/2011 page3)