An emerging market*** based in New York has been overweight China in recent months as it believes this year's relentless sell-off has gone too far. This ** outperforms most of its peers.
In the third quarter, the Pzena Emerging Markets Value Fund** increased the weighting of China and Hong Kong** in its portfolio to about 33%, an increase of about 4 to 5 percentage points, according to a report by Bloomberg Intelligence. In contrast, Morgan Stanley Capital International (MSCI IncThe share for the emerging market index is 29 percent.
The indiscriminate sell-off of China** increases the value opportunity. Allison Fisch, the manager who manages the $1.5 billion, said in an email, "We've been taking advantage of this by buying companies that we think are exceptionally cheap relative to normal profitability." ”
As policymakers increasingly take steps to ease liquidity and restore consumer confidence in a weak economy, this is the latest example of some managers taking a tactical view of China. The MSCI China Index has lost more than 14% this year, with its market value shrinking by more than half from its peak in 2021.
Data compiled by Bloomberg shows that the index currently trades at a price-to-earnings ratio of 102 times, less than its 135 times the 5-year average.
In the third quarter, pzena will be a commercial bank (China Merchants Bank Co) and WH Group Ltd., one of the world's largest pork companies) into its portfolio. Pork**, a staple food in China, has fallen to its lowest level since April 2022, a sign of a weakening economy. Investors are also shy away from banks because they fear they will be saddled with non-performing loans.
According to a Bloomberg report authored by Marvin Chen and Sufianti, Pzena's decision to increase its stake in Chinese mainland and Hong Kong** went against the prevailing market perception, with the top 100 emerging markets**'s exposure to Chinese mainland and Hong Kong falling to its lowest level in five years in the third quarter. Overseas investors sold Chinese mainland** for the fifth month in a row, and the momentum continues.
Fish, co-managed with Rakesh Bordia, Caroline Cai and Akhil Subramanian, has outperformed 97% of its peers over the past three years, according to data compiled by Bloomberg. As of Sept. 30, 2023, Pzena Investment Management said it had approximately $56.4 billion in investment assets under management globally.
Many of Pzena's stakes in China are those of companies with significant overseas revenues, including parts maker Weichai Power and home appliance maker Haier Smart Home, Mr. Fish said. Alibaba Group Holdings*** and China Overseas Land & Investment Ltd. China Overseas Land & Investment Ltd) is also in the top 10 holdings of the **.
Fish said there are still large, high-quality companies in China. "We don't think these companies should be ignored. She said.