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Investors Find Treasures in China’s Micro Stocks
May 05, 2010

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Frankfurt. Myriad small-cap Chinese stocks should outperform their larger rivals, helped by a pickup in demand from Western economies recovering from the downturn, Carlson Fund Management said.

“Chinese small caps are a deep sea to swim,” said Anna Ho, a fund manager at Carlson, adding that there was a large number of small listed stocks that grew but did not receive any market attention.

Ho, who manages the company’s China Micro Cap fund, said that a pick-up in demand for Chinese export goods would increase valuations of domestic small caps that usually outperform large caps in a recovery.

Since 2009, the MSCI China Small Cap Index has gained more than 155 percent and outperformed the 52 percent rise in the MSCI China Index. Ho’s 100 million euro ($133.2 million) fund gained 144 percent.

Top holdings include safety systems company China Automation Group and manufacturer Haitian International Holdings.

“Shenzhou International is one of our latest success stories,” Ho said. The textile company has gained 619 percent since 2009.

Ajisen, a fast-food noodle company, was an undervalued pick, she said, adding that so far the investment had not resulted in large returns. “The question will be whether McDonald’s or Kentucky Fried Chicken will dominate the Chinese market. If they don’t, Ajisen will emerge as the win ner.”

 

Reuters