1 Dec 2011
A fall in stock prices in Asia, notably China, has made valuations much more compelling, according to Mark Martyrossian, a founding partner and portfolio manager at Asia investment specialists Tiburon Partners.
He acknowledges that China has problems with non-performing loans, a real estate bubble in high end luxury residential property and inflation, but argues that the impact is over-stated. On a macro level, the continuing policy problems in the euro zone have also had a negative impact on Asian stocks.
Stock fundamentals show that investors are getting companies at very keen prices, he noted. This is the result of the impact of the situation in Europe rather than anything endemic to Asia. “There are very attractive valuations at the stock level,” Martyrossian said. “It has thrown up the type of bargains that we saw at the end of 2008.”
The portfolio manager takes particular issue with forecasts downgrading Chinese economic growth, some to low single digits. Fresh from being in Asia, Martyrossian expects growth in China to continue in the high single digit percentage range for some time to come. He noted that the Chinese government, unlike most western governments, has the capability to stimulate growth if it wishes.
The sectors Tiburon likes include property in Hong Kong, Singapore and Taiwan. Valuations on residential property, for example, are estimated to be at a 30-40% discount to net asset value. Commercial property is also in strong demand in these areas, particularly in Hong Kong and Martyrossian expects the positive underlying fundamentals across the region to endure for a while with limited downside risk.
The firm’s UCITS funds, including the equity long/short Tiburon Taurus Fund (plus Asian and Japanese long only funds), are also long in resource sector stocks, including rare earth extractors. Other areas of long exposure include financial stocks, health care and technology.
At 28 October 2011, the Tiburon Taurus Fund had gross market exposure of nearly 111% and net exposure of just over 50%. It has an annualised return of 11.66% since launch in December 2003 and was down 3.61% for the first 10 months of 2011.
He acknowledges that China has problems with non-performing loans, a real estate bubble in high end luxury residential property and inflation, but argues that the impact is over-stated. On a macro level, the continuing policy problems in the euro zone have also had a negative impact on Asian stocks.
“Asian monetary tightening has also had an impact, particularly in China,” Martyrossian said. “But because they have been tightening they have the flexibility to stop tightening. This is a position that Western central banks would give their eyeteeth to be in.”
Stock fundamentals show that investors are getting companies at very keen prices, he noted. This is the result of the impact of the situation in Europe rather than anything endemic to Asia. “There are very attractive valuations at the stock level,” Martyrossian said. “It has thrown up the type of bargains that we saw at the end of 2008.”
The portfolio manager takes particular issue with forecasts downgrading Chinese economic growth, some to low single digits. Fresh from being in Asia, Martyrossian expects growth in China to continue in the high single digit percentage range for some time to come. He noted that the Chinese government, unlike most western governments, has the capability to stimulate growth if it wishes.
The sectors Tiburon likes include property in Hong Kong, Singapore and Taiwan. Valuations on residential property, for example, are estimated to be at a 30-40% discount to net asset value. Commercial property is also in strong demand in these areas, particularly in Hong Kong and Martyrossian expects the positive underlying fundamentals across the region to endure for a while with limited downside risk.
The firm’s UCITS funds, including the equity long/short Tiburon Taurus Fund (plus Asian and Japanese long only funds), are also long in resource sector stocks, including rare earth extractors. Other areas of long exposure include financial stocks, health care and technology.
“We are trying to buy stocks that are cheap,” said Martyrossian. “But we are not being greedy.”
At 28 October 2011, the Tiburon Taurus Fund had gross market exposure of nearly 111% and net exposure of just over 50%. It has an annualised return of 11.66% since launch in December 2003 and was down 3.61% for the first 10 months of 2011.
