US$5 Billion Fund Manager Tells Investors to Be Greedy While the Market is Fearful

China is a rapidly evolving nation.

First it was exports. Cheap labour and efficiency helped China to become the maker of pretty much everything.

But this was only working while other nations were buying. That buying stopped during the aftermath of the global financial meltdown.

Multiple factories shut down. Millions of workers were out of their jobs. Chinese policy makers had to do something quick, lest let see their much-loved growth fade away.

Their plan was to pump billions into infrastructure. But not the old fiscal way — through government spending.

They drove billions of dollars into infrastructure through banks and relaxed lending.

It did the job. Millions of jobs were created. The economy continued to grow. And outside capital flowed into China to profit from projects and easy cash.

Lending May Have Left China Exposed

Yet, lending for so long has left China exposed. Some believe China’s financial industry is at risk of failing. This is, of course, the extreme opinion.

But when the outgoing governor of the central bank says policy makers have a real problem on their hands, investors take notice.

Might Not Be All That Bad

Yet it might not be all that bad. According to Jorry Noeddekaer, head of emerging markets at Nordea Asset Management in Copenhagen, a lot of the worries about China and its financial system are exaggerated.

Noeddekaer oversees over US$5 billion and thinks fear is creating some great opportunities in the market. He says:

Every two weeks or so somebody tells you that China is going to blow to pieces. It hasn’t happened so far.

All this nervousness and all these very skeptical people out there, create a great opportunity for being a stockpicker…You can buy very high quality companies cheaply.

Bloomberg continues:

Noeddekaer buys companies in the service and consumption driven part of the economy while avoiding the commodity sector and the government-owned banks.

Nordea Emerging Stars fund has returned on average 11 percent a year in the past five years. That’s better than 93 percent of its peers, according to data compiled by Bloomberg. Its biggest holdings are Samsung Electronics Co. Ltd., Tencent Holdings Ltd., Taiwan Semiconductor Manufacturing Company, Ltd. and Alibaba Group Holding Ltd.

Alibaba has “an exceptionally scalable business model” and the “monetization potential of customer engagement still have a lot of room to grow,” according to Noeddekaer.

“They’re slowly starting to make a global expansion,” he said. “With their business model, services and the IT capabilities, they will become a true global player ten years from now.”

The Emerging Stars fund is overweight India, where Noeddekaer is betting on the housing boom and growth in financial services.


Härje Ronngard,

Junior Analyst, Markets & Money

PS: Aussie property prices continue to defy gravity. Those who have tried to predict the top have been wrong thus far. That’s because property prices still have a long runway of growth ahead.

If you want to read more about a long-term booming property market, check out our special Markets & Money report, ‘Why Australian Property is on the Verge of a Decade Long Boom’, by clicking here.

Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.

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