Jobseekers and luxury-goods buyers in China are underpinning two key stock-market bets for Edinburgh’s biggest fund company.
Standard Life Investments (SLGLDIA) has been buying shares of 51job Inc. (JOBS), an online recruiter in the world’s most populous country, and Hong Kong-listed Prada SpA (1913), the Italian maker of $3,290 handbags, in recent months. They are among the investment company’s top picks for its global stock funds, said Mikhail Zverev, who is responsible for $5.5 billion at the firm.
“What we noticed is that the Italian brands in the luxury space are relatively under-penetrated in China compared to say more established French leaders,” Zverev, Standard Life’s head of global stocks, said in an interview in the Scottish capital. “Prada is very much in the catch-up mode.”
Investors are becoming more sanguine as Europe tackles its debt crisis by propping up euro-region bonds, while the U.S. edges toward a budget agreement and China’s Communist Party completes its leadership transition. The MSCI World Index (MXWO), a broad measure of developed markets, gained 14 percent in 2012.
“If I look forward to 2013, a lot of these uncertainties are coming out of the picture,” Zverez said at his office two days ago. “A lot of the dark cloud of political uncertainty has been lifted. But most importantly we don’t need runaway economic growth for our stocks to work.”
Zverev, 36, joined Standard Life, which oversees 163 billion pounds ($265 billion), in 2007 from First State Investments in Edinburgh. The Global Equity Unconstrained Fund (STIEQGI) he manages returned 16 percent this year, ranking it 17th of 128 similarly managed funds, data compiled by Bloomberg show.
Other picks include Gemalto NV (GTO), a Paris-based digital security firm that makes semiconductors and software enabling products such as electronic passports and chip and pin bank cards, and U.S. hauler J.B. Hunt Transport Services Inc. (JBHT)
51job has risen 12 percent on the Nasdaq this year, trailing the MSCI World Index. More people will start using the Internet to find work in China even as the economy slows, Zverev said. The government is targeting economic growth of 7.5 percent for 2013, according to people familiar with the plan after a central economic conference this month. The rate of growth has declined for seven straight quarters.
“We’re very early on in the penetration of online recruitment but over and above that, the competitive dynamic of the industry in China is such that the companies should be getting more and more pricing power as time goes by,” said Zverev. “They’re very much underpricing their services.”
Chinese consumers have overtaken those in the U.S. this year to become the world’s biggest buyers of luxury goods, consultancy firm Bain & Co. said on Dec. 12. Prada shares gained 97 percent this year.
“If you look at where Prada is positioned globally and apply the same parity to Chinese sales you get up to 40 percent upside,” Zverev said.
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