Photographer: Billy H.C. Kwok/Bloomberg

Top Fund Says Hong Kong Stocks Will Fly Higher On Back of Tencent

Updated on
  • Rally to be fueled by flows from mainland, Wang Menghai says
  • Wang’s fund beat 92% of peers in 2017; favors tech, consumer

One of the world’s best-performing equity gauges is set for further gains in 2018 as tech giant Tencent Holdings Ltd. and consumer stocks drive it higher, according to Shanghai-based money manager Wang Menghai.

The Hang Seng Index has led the charge among Asia’s biggest markets this year, rising 36 percent. Tencent, which has now overtaken Facebook Inc. in market value, accounts for nearly one-third of that advance. Wang, who works for Fullgoal Fund Management Co., has seen his fund beat 92 percent of peers in 2017. He plans to stay loyal to Tencent and boost exposure to companies that may benefit from quickening inflation.

“The Hong Kong benchmark is very likely to perform well in 2018, though the index rally may not be as much as this year,” Wang said in a phone interview. “Some of this year’s best performers are worth holding as long-term bulls.”

The Hang Seng Index jumped the most in seven weeks on Tuesday, and Tencent was again among the main drivers as it rose 2.4 percent. The company’s share price has more than doubled this year.

Wang’s Fullgoal SH-SZ-HK Value Selected Flexible Allocation Mixed Fund, which manages about 3.2 billion yuan ($483 million), was weighted 9.68 percent to Tencent in its third-quarter performance statement.

“We are optimistic about Tencent in the next two or three years,” he said. “It would be a wrong decision to sell it just for some short-term gain.”

Wang also has holdings in smartphone suppliers Sunny Optical Technology Group Co., which was 6.4 percent of the fund at the end of last quarter, and AAC Technologies Holdings Inc. Their shares have also soared.

Inflation Plays

Going forward, Wang is interested in food and beverage companies and dairy and liquor producers because they may be able to hike selling prices amid quickening inflation. China’s consumer price index expanded 1.9 percent in October, the fastest pace in nine months.

Demand from investors on the Chinese mainland will support Hong Kong stocks into next year, said Wang, who plans to continue investing 75 percent of his portfolio in the city’s shares. Mainland investors have purchased more than 390 billion yuan of Hong Kong equities in 2017 and November is poised to see the most buying this year on a monthly basis.

“The Hong Kong market is attractive to mainland investors since they can buy things that aren’t available on the mainland,” he said. “China’s economy is still growing at about 7 percent annually and no doubt there will be a bunch of good companies -- this isn’t a short-term trading opportunity.”

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