Bloomberg News

Mizuho Asset May Buy China Banks, Developers After Market Rout

December 06, 2011

Dec. 6 (Bloomberg) -- Mizuho Asset Management Co., a unit of Japan’s third-largest bank, may buy “cheap” Chinese banks and developers because they may outperform in a rebound by the nation’s stocks as inflation eases.

The firm, which has a “slightly underweight” allocation for Chinese financial companies, may buy shares of lenders such as Industrial & Commercial Bank of China Ltd., Masahiko Ejiri, a fund manager at the company, said in an interview in his Tokyo office yesterday. Mizuho Asset oversees $41 billion including Hong Kong-listed equities.

“We are relatively more bullish on Chinese stocks now than six months ago,” said Ejiri, whose MHAM Asia Open fund has beaten 78 percent of rivals in the past year, according to data compiled by Bloomberg. “We’re considering increasing our investments in financials in the short term.”

A gauge of banks and developers in the MSCI China Index has fallen 23 percent this year, compared with a 17 percent drop for the benchmark index of Chinese stocks available to overseas investors. Shares have tumbled as the central bank boosted interest rates three times in 2011 to tame inflation that reached a three-year high of 6.5 percent in July. The MSCI China’s financial index trades at 7.6 times estimated earnings, compared with a four-year average of 12.6, according to data compiled by Bloomberg.

“Banks and property companies are very cheap in valuation,” Ejiri said. “There may be some more loosening coming and bank lending may be in better shape next year.”

Inflation Outlook

Mizuho Asset is joining China International Capital Corp. in turning more positive on Chinese equities after inflation slowed in October and the People’s Bank of China said on Nov. 30 it would cut lenders’ reserve requirements for the first time since 2008. Goldman Sachs Group Inc. on Nov. 29 recommended clients exit a bet that Hong Kong-listed companies will gain amid concern over a “relatively challenging” outlook in the country.

Hao Hong, CICC’s Beijing-based global equity strategist, advised buying financial stocks on a potential cyclical rebound in the economy, according to a Bloomberg Television interview on Dec. 2. China’s inflation rate may have fallen to 4.3 percent in November, CICC’s Hong said. The November data are due on Dec. 9. The government’s full-year target is 4 percent.

“The inflation situation is getting better,” Ejiri said. “Chinese equities have been pricing in high inflation.”

--Allen Wan. Editors: Richard Frost, Darren Boey

To contact Bloomberg News staff for this story: Allen Wan in shanghai at awan3@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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