VSP CIO on Bloomberg: China markets want to find a way up

Jun-08,2022 | 维世

June 7, VS Partners Executive Chairman and CIO, Vanessa Xu, on Bloomberg Markets: China Open

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Full video link:

https://www.bloomberg.com/news/videos/2022-06-07/vs-partners-xu-on-investment-strategy-video

ON CHINA

China market does seem to want to find a way to go up 

We observe a couple of signals that the market has, if not already, bottomed or neared the bottom.

The upstream resources and materials, which took lead over the last year, yielded that leadership to broad-based recovery sentiment. 

The ChiNext and Starboard representing growth factors recovered stronger over the last month than the CSI 300.

The breadth and depth of the market are stabilized

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Next test is earnings dispersion 

In domestic industrials and manufacturing, we see healthy recovery in in our managers’ portfolio. 

[On broader China market] Earnings revisions as result of covid impact may still take time to be priced in.The COVID impact is not linear, and it hits different sectors differently. Some of the sectors that will be more straightforward such as travels, services, but some of the sectors such as complex manufacturing supply chains will take a longer time to fix.

Many of the overpriced sectors has corrected on the valuation over the first quarter. Next to see is whether the earnings of those companies can sustain the after valuation correction.

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ON ALLOCATION UPDATE 

Long-term constructive set-up for commodities 

[Globally] Pursuit of supply chain resilience, energy independence, and return of capex cycle under ESG constraint are healthy long-term set-up for commodities.

Energy: quality assets with a capex-light model, meaning that they have invested and now harvesting high quality assets to produce, which means their margins are improving. Those are the equities that we are in as well as in the physical market using directionless hedge fund strategies in view of intermittent [commodity price] reversal. Another example is electricity.

Commodity: [it’s a broad space] one example is LNG. It's a clean bridge from fossil fuel to alternative energy. It was not a globally tradable commodity, but out of Ukraine situation and European energy independence, LNG will be in the next two or three years one of the attractive trades in commodities.

These are the industrial inputs that we express the view of supply-chain re-orientation.

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