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The 2013 All-China Research Team: Portfolio Strategy, Third: Li Chen
Although he slips one position to No. 3,Li Chenof UBS earns praise for what one money manager terms his “comprehensive analysis of the momentum of different sectors.” For the balance of the year, the Shanghai-based strategist holds a positive view of the market because an expected fourth-quarter economic slowdown has been priced in. Liquidity will be better than expected in the final three months of the year, he adds, given levels for bank loans, capital inflows and social finance (a broader measure that includes direct financing and a variety of alternative loan products). He therefore is upbeat on consumer-related stocks — especially reasonably valued names in the autos, health care, home appliances and property segments — since the economy is increasingly reliant on consumption for growth, and overleverage is not an issue. Chen also favors companies that deal with environmental pollution, such as those that track air and water quality and manufacture air filters, as the Chinese government seeks solutions to these issues. In the long term, however, he is cautious, citing “extremely high” funding costs that will hurt corporate earnings and slow corporate capital-expenditure rates. He’s also concerned about overcapacity for cyclicals, as well as historically high gearing ratios in sectors like commodities, heavy industry, machinery and raw materials. —Carolyn Koo |