(Yicai Global) May 17 -- Increasing confidence among domestic investors in China’s state-owned enterprises, whose stock prices have soared this year, will result in foreign investors “taking another look at them,” according to billionaire investor Mark Mobius.
“Maybe we should take a look at those?,” overseas investors will ask themselves, Mobius said in an video interview with Yicai Global on May 15 from his home office in Dubai. Valuations “just look too attractive to ignore,” he said.
The shares of Chinese SOEs from telecom carriers to energy firms have rallied this year, with the Hang Seng China State-Holding Enterprises Index having gained almost 10 percent in the four months ended April 30. The Hong Kong-traded stock of China Mobile [HKG: 0941] has climbed by more than 30 percent this year, while that of PetroChina [HKG: 0857] has nearly doubled. And China Railway Group [HKG: 0390] has surged over 40 percent.
Foreigners usually favor Chinese companies that are not government owned, according to Mobius. “They’re afraid that political influence will have an impact on what the company does, but I think that concern will probably decline because of the valuations,” he said.
Over the years that Mobius Capital Partners has been investing in China, the country’s SOEs have made “an incredible improvement” in corporate governance after the government told them to improve, he said. They understood that if corporate government was improved, earnings and operations would also pick up, Mobius said.
“Many of these SOEs are doing very well as a result,” he said. “This will probably continue because the ESG [environmental, social, and governance] characteristics are very important for not only the companies, but for the investors.”
Mobius is constantly investing in China and is optimistic about various sectors, including healthcare and chip assembly and testing, he said, adding that it would be hard for investors to neglect the Chinese market because China makes up nearly 30 percent of the MSCI Emerging Markets Index.
Mobius is especially optimistic about the healthcare sector because, with the growth of China's economy and rising incomes, people have been paying more attention to health and beauty, he noted. As China steps up its investment in technology, he is also upbeat about semiconductor firms engaged in corresponding design and testing, he added.
Changes in market preferences do not mean that private firms will lose out on investment opportunities, Mobius stressed. The potential split up of big, diversified groups for independent listings will be attractive to investors, he said. “There’s an opportunity there to create value.”
Alibaba Group Holding announced on March 28 that it had split itself into six business groups to deal with a rapidly changing market environment, adding that each will independently raise funds and go public when the time is right.
Editors: Xu Wei, Martin Kadiev