Thursday, February 26, 2009

China Asset Management Seeks ‘Value’ Investment in U.S., Europe

By Judy Chen and Chua Kong Ho

Feb. 25 (Bloomberg) -- China Asset Management Co., the country’s biggest fund manager, said it’s seeking investments in the U.S. and Europe that stand to gain from the growth in emerging markets.

The fund, which manages $26 billion of assets, said the stock market slump has offered bargains in these countries, and it favors companies based on their management, long-term earnings outlook and the ability to generate cash flow.

“Value has emerged after the big declines in overseas stock markets,” the Beijing-based company said in an e-mailed reply to queries. “We would buy at a reasonable price and hold for a period of three to five years.”

The MSCI World Index fell 16 percent this year, extending a record 42 percent drop last year. The Dow Jones Industrial Average and FTSE 100 Index trade at about half of the valuation of China’s Shanghai Composite Index.

China Asset Management’s $2 billion Global Equity Select Fund, managed by Yang Changheng and Zhou Quan, has fallen 6.7 percent this year, outperforming the MSCI World Index and the 9 percent decline by the Hang Seng China Enterprises Index, which tracks Chinese companies traded in Hong Kong.

The fund’s biggest holdings include China Petroleum & Chemical Corp., Asia’s biggest refiner, China Telecom Corp., the country’s biggest fixed-line phone carrier, and Cnooc Ltd., the biggest Chinese offshore oil producer, according to its fourth- quarter fund report dated Jan. 23.

Higher Dividends

The fund also prefers U.S. and European companies that offer high dividends. The Hang Seng China index returned a dividend yield of 3.8 percent, compared with the Dow’s 4.3 percent and the FTSE’s 6.3 percent return, data compiled by Bloomberg showed.

“In the face of very low government bond yields and inadequacy of cash in real economies across the world, U.S. and European companies with high cash dividend payouts are more attractive,” the fund said in the e-mail.

China has cut interest rates five times since September to help bolster domestic demand amid a global recession, while the European Central Bank has reduced its benchmark rate four times to 2 percent since early October. The U.S. Federal Reserve has lowered its key rate to a range of zero to 0.25 percent.