(Oct 4): Invesco Ltd’s chief investment officer for Hong Kong and mainland China, Raymond Ma, who predicted double-digit returns in Chinese equities this year, said there are signs the surge has gone too far for some stocks.

Ma, who manages the US$492 million (RM2.07 billion) Invesco Greater China Equity Fund, said investors should be wary of stocks that have surged 30-40% in the recent boom. He added that his fund hasn’t been forced to chase the recent rally, after loading up on Chinese companies’ shares over the past few months.

“Some stocks have become really overvalued at historical highs,” he said in an interview, adding that these shares lack a clear value proposition based on their likely earnings performance. “That’s an opportunity to trim.”

His comments add to rising concerns that the rally in Chinese stocks has gone too far, at least in some sectors. Hong Kong’s Hang Seng Index has jumped by 25% over the last two weeks, fuelled by a rush to buy the shares of mainland Chinese companies. On Wednesday, Nomura economists called for a “sober assessment” of the price surge, which they compared to a boom and bust in Chinese stocks in 2015.

Ma’s prediction at the end of last year that Chinese stocks would jump by double digits in 2024 came at a time when many other investors were bearish on the market. His fund has delivered a 26% return the past year, beating 95% of its peers. The fund is up almost 1% over five years.

Ma says there’s still plenty of scope for investors to make money buying Chinese stocks, despite the risk of prices overshooting in the short-term. Over the last two months he has been steadily adding positions in real estate and financial companies, and is now close to fully invested, he said.

A gauge of Chinese property stocks is up around 51% this week, while an index of the Hong Kong-listed Chinese brokers shares is 80% higher.

China’s onshore stock market has been closed since Tuesday for the Golden Week holiday, typically seen as a time when Chinese consumers loosen their purse strings. Ma said investors should keep a close eye on property sales data during the period, which will offer clues to whether the recent rally in real estate stocks can sustain momentum.

“If the data continues to be good in the next two weeks, then property stocks can go further,” he said. “Otherwise you could see some correction.” 

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