Standard Life Investments global equity manager Mikhail Zverev has taken his exposure to Chinese stocks to 8 per cent of his portfolio, but said the positions are “not a view on China”.
The manager’s SLI Global Equity Unconstrained fund has outperformed, in spite of the volatility affecting the region’s stocks in recent months.
The vehicle has returned 0.5 per cent year to date, compared with an average 3.7 per cent loss by the IA Global sector.
Mr Zverev has been aided by holding largely US-listed Chinese stocks, although even these have not been immune to the sharp reversal in sentiment seen since June.
Online giant JD.com’s shares remain 7 per cent higher on the year, but discount retailer Vipshop has fallen 19 per cent, while web conglomerate Baidu has plunged 41 per cent.
This compares with a 12.6 per cent tumble in Hong Kong’s Hang Seng index and a 10 per cent drop in the S&P 500 index, as of September 28.
However, while some investors ran for the hills at the sight of the summer volatility – which culminated in an 8.5 per cent fall in China’s onshore index on August 24 – Mr Zverev added to all three positions, which he said had “completely sold off in the panic”.
China is Mr Zverev’s third-largest allocation by country, and made up 7.2 per cent of his portfolio at the end of August.
His additions since that point meant his exposure had risen to 8 per cent as of mid-September.
While he described this as a “meaningful position” in the country, the manager emphasised his bottom-up stock-picking process.
He said: “There are reasons to be concerned about China but not these stocks, which sold off more than they should have.”
Elsewhere, Mr Zverev has been finding more opportunities in Italy.
He recently bought Italian investment bank Mediobanca, which he thought would benefit from an uptick in mergers and acquisitions (M&As) in the country.
He said: “M&A activity is beginning to recover in Italy. With that they will need advice and look to control costs, and Mediobanca stands to benefit from this.”
Meanwhile, the manager noted he was beginning to find a few more opportunities in peripheral Europe.
He bought Spain’s largest airline, Iberia, which he envisaged benefiting from growing transatlantic airline business and also from the country’s economic recovery.
When it comes to global stocks, Mr Zverev said he had seen “a real shift in how people have started to invest in equities”.
He said: “In general, it’s not an overwhelmingly enthusiastic feel for equities – some segments of the global market are very expensive.”
The SLI Global Equity Unconstrained fund has also significantly outperformed its peer group across three years, returning 42 per cent compared with the sector’s 28 per cent, data from FE Analytics shows.
