Samir Mehta, JO Hambro Capital Management
JO Hambro Capital Management (JOHCM) has reduced its allocation to Chinese equities in order to to take profits and to avoid future policies ricks.
“I have been pulling back my exposures in mainland China, cutting back my A-share holdings to about 2.5% from their peak of almost 15%,” Samir Mehta, senior fund manager at the UK-based firm, told a webinar this week.
Mehta explained that his adjustments in the portfolio were mainly due to high valuations, and also based on his observations that the Chinese government has made it clear that it will not keep inflating bubbles, whether they are in property or stock markets, because it believes they are a threat to the domestic economy.
Mehta and senior fund manager Cho-Yu Kooi manage the $126.8m JOHCM Asia Ex Japan Fund, which has posted a return of 9.8% year-to-date, outperforming its benchmark, the MSCI AC Asia ex Japan (1.91%), and also doing better than its sector peers (3.62%), according to FE Fundinfo.
The fund has generated a three-year cumulative return of 59.86%, outperforming both its benchmark (36.85%) and its sector average (31.27%), FE Fundnfo data shows.
Mehta has high exposure to India, and many of the companies he owns in the portfolio are dominant in their sectors, and are adapting well to the extraordinary challenges created by the Covid pandemic.
“Businesses in India shouldn’t be negatively impacted [by the pandemic], but I am nimble and interacting closely with local companies,” he said.
Korean exposure
Mehta has been taking cyclical positions in Korea, and he highlighted Kakao, which is a dominant Korean technology company. Kakao is currently listing a bank in which it owns a stake, and also plans to list a crypto exchange firm and an animation company, called Kakao Entertainment.
Several parts of Kakao’s business are now likely to unlock value for it, said Mehta, adding that he also other names in that country, including chipmaker Hynix, Samsung Electronics, and auto company Hyundai.
“They are trading at cheap valuations and [their businesses] are economically sensitive,” he said.
The greatest risks to the strategy are global factors, according to Mehta.
“Inflation and future interest rate policies are the biggest issues right now. But, some elements in our portfolio will benefit from rising interest rates, and we are confident about our core holdings,” he said.
The fund’s top five holdings are Kakao, Samsung Electronics, Jubilant Food Works, Tencent and SBI Card. In terms of country exposure, India accounts for 35% of the portfolio, China for 23%, Korea for 22% and Hong Kong for 9%, according to the latest fund factsheet (30 June 2021).
JOHCM Asia Ex Japan Fund vs benchmark and sector average
