“All lights are green for Chinese stocks”

Haiyan Li-Labbé, China fund manager at Carmignac Gestion, is betting on a rebound in Chinese stocks after China’s reopening.

After three difficult years for Chinese stocks, the horizon is brightening for them. Therefore, it is well patronized that the Hong Kong Stock Exchange resumes its operations this Thursday after the Chinese New Year before Shanghai on Monday. Haiyan Li-Labbé, fund manager and China equity analyst Carmignac, says he’s comfortable with the thinning. Without JPMorgan’s scathing note published in May 2022, he notes, analysts described China as “uninvestable,” and Beijing would never have let go of the ballast imposed by heavy regulation on internet companies and other parts of its industry.

Above all, the Chinese government’s abandonment of the “zero-covid” measures it announced at the end of the year changes things for listed stocks. “All the lights turned green,” he says. “After the Congress of the Communist Party The Chinese government has changed its attitude towards internet giants, concluding two years of regulatory changes such as cybersecurity, antitrust rules, … All companies have complied with these regulations and done their due diligence before reporting everything to the government. Additionally, since October we have seen signs of China reopening, including fewer quarantine days for travelers. Since then, we have seen an improvement in investor sentiment,” he notes. “The risk of delisting ADRs (such as corporate securities). Ali Baba and BaiduThe People’s Bank of China, listed on Wall Street, also fell in December after it said it was satisfied with the progress of an audit submitted by the government.

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“Alibaba trades at 4 times earnings, which is ridiculously low.”

Haiyan Li-Labbe

Fund manager at Carmignac

Haiyan Li-Labbé notes that his management firm and his fund Carmignac China The Chinese e-commerce giant has strengthened its position in Alibaba, now represents the largest holding in his fund. “Alibaba trades at 4 times earnings, which is ridiculously low,” he said. “Many Chinese companies are listed in the US, such as Alibaba, JD, Baidu,… As the risk of their ADRs being delisted on Wall Street is reduced, this is positive for Hong Kong-listed technology companies, as the Liquidity risk is also decreases. . The manager explains that in the case of Alibaba, which applied for an initial listing in Hong Kong, “This will bring liquidity to the activity and affect the whole market”.

+63%

The Hang Seng Tech index of Chinese technology stocks has risen strongly since late October.

The fund manager notes that other sectors will also benefit from China’s reopening. “Like hotels, restaurants, distribution, logistics services, car sharing companies Didi … will benefit from it. Didi can now work because its software can be downloaded again after a two-year suspension by the governmentThe manager adds that he sees opportunities mainly in the low-cost consumer and internet sectors.



“We see long-term opportunities, but the current valuation of industry companies and groups involved in the energy transition is high.”

Haiyan Li-Labbe

Fund manager at Carmignac

Facing the topic of energy transition, it shows that Chinese companies active in green energy do not present an interesting valuation. “We see long-term opportunities, but The current valuation of industrial companies and groups related to the energy transition is high.”

The manager isn’t the only one bullish on Chinese stocks. Analysts at two management firms, Atlantic Financial Group and Comgest, also note this This Chinese New Year of the Rabbit will be synonymous with prosperity for Middle Kingdom values. However, analysts at another fund management company, Schroders, are more cautious as China’s reopening, accompanied by a resurgence in Covid-19 cases, still makes people cautious.

Declining international demand for Chinese goods

The decline in international demand for Chinese products has led to an increase in output cancellation of shipments at the country’s largest ports, says the daily Financial Times. “The export side of the Chinese growth recovery story could be very disappointing,” said Frank Vranken, director of economic research at Edmond de Rothschild Europe.

Industrialists in China have pointed to an increase in “empty sails,” which refers to the number of cargo carriers avoiding ports due to inventory shortages or delays. Data provider Drewry says the cancellation rate could rise to 31% from 23% in 2022 and 16% in 2021.

Summary

  • Carmignac fund manager Haiyan Li-Labbé believes so the lights are green For Chinese stocks.
  • Above all, he sees opportunities in the internet and consumer sectorsIt will benefit from China’s reopening.
  • He points Undervaluation of stocks like Alibaba.
  • On the other hand, he notes that Chinese values ​​are connected energy transition they are expensive.

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