Top fund vows loyalty as Tencent breaks $500bn value barrier

2017-11-21 06:35 - Cindy Wang and Jeanny Yu, Bloomberg News
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Tencent CEO Pony Ma attends a news conference anno

Tencent CEO Pony Ma attends a news conference announcing the company’s results in Hong Kong. (Pic: AP)

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Taipei - One of the world’s best-performing equity gauges is set for further gains in 2018 as tech giant Tencent Holdings and consumer stocks drive it higher, according to Shanghai-based money manager Wang Menghai.

Hong Kong’s Hang Seng Index has led the charge among Asia’s biggest markets this year, rising 34%. Tencent accounts for nearly one-third of that advance. Wang, who works for Fullgoal Fund Management, has seen his fund beat 92% of peers in 2017. He plans to stay loyal to Tencent, which just became the first Chinese tech stock to break the $500bn market value barrier, and boost exposure to companies that may benefit from quickening inflation.

“The Hong Kong benchmark is very likely to perform well in 2018, though the index rally may not be as much as this year,” Wang said in a phone interview. “Some of this year’s best performers are worth holding as long-term bulls.”

Wang’s Fullgoal SH-SZ-HK Value Selected Flexible Allocation Mixed Fund, which manages about 3.2 billion yuan ($483m), was weighted 9.68% to Tencent in its third-quarter performance statement. The company’s share price has more than doubled in Hong Kong this year, but Wang’s not looking to take profit yet.

“We are optimistic about Tencent in the next two or three years,” he said. “It would be a wrong decision to sell it just for some short-term gain.”

Tencent’s shares were up 3.3% at 10:25 on Tuesday morning in Hong Kong, taking their four-day gain to 13%.

Wang also has holdings in smartphone suppliers Sunny Optical Technology Group, which was 6.4% of the fund at the end of last quarter, and AAC Technologies Holdings. Both these companies’ shares have also soared this year.

Inflation plays

Going forward, Wang is interested in food and beverage companies and dairy and liquor producers because they may be able to hike selling prices amid quickening inflation. China’s consumer price index expanded 1.9% in October, the fastest pace in nine months.

Demand from investors on the Chinese mainland will support Hong Kong stocks into next year, said Wang, who plans to continue investing 75 % of his portfolio in the city’s shares. Mainland investors have purchased more than 390 billion yuan of Hong Kong equities this year and November is poised to see the most buying this year on a monthly basis.

“The Hong Kong market is attractive to mainland investors since they can buy things that aren’t available on the mainland,” he said. “China’s economy is still growing at about 7% annually and no doubt there will be a bunch of good companies - this isn’t a short-term trading opportunity.”

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