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Fidelity’s Ma cuts Chinese IT bets over volatility fears

Fidelity’s Ma cuts Chinese IT bets over volatility fears

Citywire A-rated Raymond Ma has trimmed exposure to IT stocks in his US$477 million Greater China fund over the past quarter.

The Asia equity specialist opted to reduce exposure in his fund for fears of volatility in the region.

‘I’ve trimmed the overall exposure to internet stocks as their valuations were getting stretched and this segment may experience some volatility ahead of the listing of Alibaba,’ Ma told Citywire Asia.

However, Ma said, as the Chinese internet industry continues to offer long-term secular growth, he would accumulate quality internet stocks on weakness.

‘Information technology remains a very important new China sector, led by internet-related names and Taiwanese semiconductor manufacturers,’ he added.

Chinese internet giant Tencent Holdings Ltd. makes up 5.6% of the fund’s portfolio. Electronic component manufacturer TSMC leads the fund’s holdings, accounting for 8.21%.

Less exposure to Macau

Ma said he had also reduced exposure to Macau gaming stocks in previous quarters over increasing regulatory concerns.

‘They are facing heightened regulatory risks; the anti-corruption campaign is an example,’ said Ma. ‘Moreover, their valuations were getting stretched following the rally last year.’

Nevertheless, Ma said he likes Macau casino operators, which are supported by the demographic trend of a growing mass market.

The fund currently has an overweight stance on consumer discretionary stocks and has also recently increased exposure to insurance and brokerage stocks.

‘Within financials, I have a notable preference for insurers. Chinese insurers are expected to be key beneficiaries of the much-awaited policy changes in the financial sector. Selected insurers are supported by attractive valuations and favourable medium term returns prospects.’

Ma also said he has been reducing the fund’s underweight stance towards financials. This sector currently makes up 30.5% of the fund compared to an index weight of 35.6%.

‘At a country basis, China accounts for a majority of the positions in financials, followed by Hong Kong and Taiwan.’

However, he is not very positive on China’s banks. ‘In general, the fund has remained significant underweight in the Chinese banking industry,’ he said.

‘Despite the cheap valuations, I’m concerned over the asset quality in the Chinese banking sector in the foreseeable future.’

Over the past three years, the Fidelity Greater China Fund has returned 19.63% while the MSCI Golden Dragon TR benchmark has risen 18.04% in USD terms.

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