Markets

Europe debt crisis lures Henderson to China equities

(Agencies)
Updated: 2010-05-26 13:17

Henderson Global Investors has been buying Chinese equities on expectation Europe's debt crisis will prompt China's government to delay further curbs on the country's property industry.

The fund manager bought Bank of China Ltd's Hong Kong- listed shares and may purchase Chinese property developers traded in the city's exchange in the next two months, said Manraj Sekhon, London-based head of international equities. The company has been buying casino operator Sands China Ltd and New York-listed Ctrip.com International Ltd, which have been benefiting from growing consumption in Asia, he said.

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"We see better visibility and growth prospects outside of Europe, particularly in China," Sekhon, whose firm oversees $94 billion in assets, said in an interview yesterday. "The problems of Europe are not going away immediately." Henderson Global has been "underweight" Europe since December 2008, he said.

The MSCI World Index dropped 1.4 percent yesterday, the lowest closing level since August 18, 2009 as concern over the health of European finances deepened after the International Monetary Fund called on Spain to make more progress overhauling its ailing banks. Four Spanish savings banks yesterday submitted a proposal to the nation's central bank to merge their businesses.

The gauge slumped 4.5 percent last week after US jobless claims unexpectedly rose and on concern that Europe will fail to stop its debt crisis from spreading. Disappointing growth in the US and the worsening crisis in Europe may convince China to hold off the introduction of additional measures to curb spiraling property prices, Sekhon said.

"We have been increasing our exposure to China," Sekhon said. "In the next three months or so, the market may start pricing in a peaking in monetary tightening in China. If you can get around this short-term volatility in terms of policy, you've got a very good entry point in China."

Henderson is favoring Bank of China, the nation's third- biggest lender, over its bigger rivals because of more attractive valuations, Sekhon said. The stock is trading at 1.6 times the company's corporate net worth, compared with at least 2 times for Industrial & Commercial Bank of China Ltd and China Construction Bank Corp.

Shares of Sands China, Asia's biggest casino operator by market value, have climbed 16 percent this year. The company said on May 7 first-quarter net income more than quadrupled.

Bank of China gained 0.3 percent to HK$3.89 at 10:37 am local time in Hong Kong trading today, while Sands China climbed 2.6 percent to HK$10.94.

Ctrip.com, China's biggest online-ticketing agent, said May 11 first-quarter revenue climbed 46 percent from a year earlier. The company's stock has gained 3.4 percent this year.