Shanghai Chongyang Investment Management Co., whose oldest China hedge fund has returned almost three times as much as equity benchmarks, said the nation’s stock and bond markets are poised to rally as the “worst” part of a deleveraging process appears over.
“As far as market impact is concerned, the most violent phase of this campaign-style deleveraging is over,” Chongyang President Wang Qing said in an interview with Bloomberg TV in his office atop a skyscraper overlooking Shanghai’s financial district. He is “more positive” on the outlook for bonds and “especially the stock market.”
China has embarked on a drive to reduce leverage in financial markets and snuff out systemic risks ahead of a Communist Party reshuffle later this year. Some of the nation’s most aggressive dealmakers, including Anbang Insurance Group Co. and HNA Group, have come under scrutiny.
Mainland shares have been dragged down by the campaign, with the Shanghai Composite Index trailing global indexes and Hong Kong stocks this year. The index has rebounded from a low in May, and is up about 5.5 percent this year. Yields on top-rated five-year onshore corporate bonds have spiked, peaking at more than 5 percent in May before easing to 4.6 percent as of Wednesday.
Chongyang manages about 20 billion yuan ($2.9 billion) in assets in mostly long-only A-share funds. One of its oldest funds, opened in September 2008, generated an annualized return of 18 percent from its inception through the end of June, compared with a roughly 6.5 percent annual return for the Shanghai Composite Index.
Taming Debt
Alongside a broad and long-running effort to tame debt levels, a report this year for the Communist Party leadership on avoiding Japan’s past economic mistakes recommended clamping down on overseas purchases by some of China’s biggest private companies, according to a person who saw the document.
As the deleveraging campaign goes on, officials are unlikely to loosen their grips on financial institutions, according to Wang, who cited pledges to strengthen financial stability highlighted by a key work conference chaired by President Xi Jinping last month.
Source: Bloomberg
