China's stock market will rally as much as 30 percent next year as surging exports boost profits and a strengthening yuan encourages overseas speculative capital to buy properties, according to ABN Amro Teda Fund Management Co.
Machinery makers, banks and property developers are likely to lead gains, Liu Qingshan, chief investment officer at the Beijing-based firm, said yesterday at a conference in Shanghai. He didn't name specific stocks.
``The market gain may range between 20 percent and 30 percent next year,'' said Liu. ``The themes of rising exports and the yuan revaluation will continue to prop up the market.''
Both the Shanghai Composite Index and the Shenzhen Composite Index have jumped 63 percent this year, making them the best-performing benchmarks in the Asia-Pacific region. The measures are at the highest they've been in more than five years.
The Shanghai Composite, which tracks yuan-denominated A shares and foreign-currency B shares, rose 29.67, or 1.6 percent, to 1896.48 at the 3 p.m. close today. The Shenzhen Composite, which tracks the smaller of China's two stock exchanges, gained 5.39, or 1.2 percent, to 455.04.
Beijing-based ABN Amro Teda is a venture between ABN Amro Holding NV, the largest Dutch bank, and Tianjin Teda Investment Holding Co., an investment arm of the Tianjin government. The company manages six funds with about 9 billion yuan ($1.1 billion) of assets.
Machinery manufacturers will sustain their earnings growth next year as overseas sales increase and economic expansion at home spurs local demand, Liu said.
``The valuation of machinery stocks isn't high and they will face a revaluation,'' he said. ``China's machinery makers have the edge over technology and costs'' against foreign rivals.
Exports are expected to account for as much as 50 percent of total sales of China's machinery industry over the next five years, up from 20 percent, according to Orient Securities Co., the country's eighth-largest brokerage in terms of assets. China's trade surplus surged to a record $23.8 billion last month, according to the customs bureau.
Some machinery manufacturers have already jumped this year on improved earnings. Yuan-denominated shares of Shanghai Zhenhua Port Machinery Co., the world's biggest maker of container cranes, have more than doubled this year. Net income for the three months through Sept. 30 rose 34 percent from a year ago. Sales will jump 50 percent this year, said President Guan Tongxian at a conference last month.
Shares of Changsha Zoomlion Heavy Industry Science & Technology Development Co., a manufacturer of construction machinery, have advanced 107 percent this year. Third-quarter profit climbed 66 percent, the company said last month.
China's economy, which overtook the U.K. as the world's fourth largest last year, expanded by 10.4 percent in the third quarter after growing 11.3 percent in the previous three months.
Expectations of a stronger Chinese yuan will continue to lure speculative money and push up domestic property prices, benefiting listed real-estate developers, Liu said. Government measures to rein in property prices that have more than doubled since 2000 don't seem to be working, he said.
``No matter how the government cracks down on the property market, the upside trend cannot be reversed amid the backdrop of the yuan's revaluation,'' said Liu.
China Vanke Co., the nation's biggest property developer, last month said profit in the three months to September more than doubled on a 20 percent rise in property prices in the southern city of Shenzhen during the quarter. Shares of Vanke have doubled this year. Poly Real Estate Group Co., China's largest state-owned developer, said last month third-quarter profit rose more than fivefold as housing sales increased. The stock has surged 128 percent since its debut in July.
Banking stocks are also among Liu's investment options as lenders are expected to run more diversified financial businesses, such as setting up asset management units. ``That will act as a catalyst for lenders,'' he said.
Liu said he will also allocate some of his funds to consumer, steelmaking and power stocks next year.
ABN Amro Teda is marketing an equity fund that will allocate as much as 95 percent of its assets to stocks. The company plans to raise as much as 5 billion yuan from the new fund, Chief Executive Walter Lin said in an interview on Nov. 2.
The mainland fund industry was worth 511.4 billion yuan on June 30, an increase of 9 percent from the end of last year, according to China Galaxy Securities Co., the country's second- largest brokerage by assets.
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