China Asset's Wang Buys Property Stocks as Fund Trumps Rivals for 5th Year

China Asset Management Co., the nation’s biggest mutual fund company, boosted its holdings in property stocks in its flagship fund in the fourth quarter even as the government tightened policies to curb asset bubbles.

Wang Yawei increased the proportion of real-estate shares in his China AMC Large-Cap Select Fund to 19 percent from 13 percent, while cutting holdings of banks and insurers to 20 percent from 24 percent. China AMC had 7.7 billion in assets ($1.2 billion) as of Dec. 31, a quarterly report posted on its website showed. The fund has beaten 97 percent of rivals over the past five years, according to data compiled by Bloomberg.

A gauge of property stocks in the Shanghai Composite Index jumped 3.8 percent today, the most among the five groups and the biggest gain since Jan. 4. The benchmark measure climbed 1.4 percent. Goldman Sachs Group Inc. also boosted its stock rating for Chinese real-estate shares to “overweight” today, citing the prospect of “more decisive policy action” in the near term.

“China’s stock market will continue to fluctuate,” Wang said in the report. “Investment opportunities may depend on China’s inflation levels.”

The nation’s property stocks are rebounding this year on speculation rising demand for real estate will bolster prices, which climbed for a 19th month in December. The gauge of developers has jumped 3.4 percent in 2011, compared with a 3.3 percent slump for the broader index. Wang increased his equities allocation to 89.3 percent as of Dec. 31, compared with 87.8 percent in the previous quarter, the report showed.

Policy Tightening

The property gauge plunged 28 percent in 2010, the most among the five industry groups, as Premier Wen Jiabao’s government ordered banks to set aside more reserves six times and boosted interest rates twice to tame inflation and curb asset bubbles after record gains in lending and property prices.

Jim Chanos, the hedge fund manager who was one of the first investors to foresee the 2001 collapse of Enron Corp., said in a Bloomberg Television interview last month that China’s property boom continues “unabated” and has even picked up since the government enacted policies to cool speculation.

Chinese property stocks were raised to “overweight” from “neutral” at Goldman Sachs, which said earnings risks to developers and banks are “limited,” according to a report by analysts including Helen Zhu.

China Vanke Co., the nation’s largest developer, increased 3 percent to 8.38 yuan today. Yunnan Metropolitan Real Estate Development Co. added 0.5 percent to 18.63 yuan, the first gain in a week. The company was Wang’s 10th biggest holding, according to the quarterly report.

‘Best Fund Manager’

Wang cut his holdings of Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., the nation’s two largest lenders, in the fourth quarter. He bought shares of China United Network Communications Ltd., making it No. 7 on the list of his top 10 biggest holdings. Xinjiang Guanghui Industry Co., a real-estate company that has surged 76 percent over the past year, remained the biggest holding, while China Gezhouba Group Co. and China Construction Bank Corp. ranked second and third.

The China AMC Large-Cap fund has beaten the Shanghai Composite in the past five years. In 2010, it returned 24 percent, after a 116 percent jump the previous year. In 2008, the fund fell 36 percent as the index plunged 65 percent.

“Wang is no doubt the best fund manager in China,” said Zhang Haochuan, head of research at Z-Ben Advisors, a Shanghai- based funds adviser. “He’s like the Peter Lynch of China for his value investing.”

Lynch, one of America’s best-known investors, managed Fidelity’s Magellan Fund from May 1977 to May 1990. Assets under management during that time grew to $14 billion from $22 million, according to Adam Banker, a Fidelity spokesman.

--Irene Shen in Shanghai. With assistance from Chua Kong Ho in Shanghai and Richard Frost in Hong Kong. Editors: Allen Wan, Linus Chua

To contact the Bloomberg News staff on this story: Irene Shen in Shanghai at ishen4@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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