Baring Hong Kong China Fund

Agnes Deng, ex-fund manager of Standard Life China Equities Fund, joined Baring on 1st September 2007. She replaced Lilian Co to take the lead of Baring Hong Kong China Fund ....

YT Kum, CFA 26 October, 2007 | 0:00
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Management Profile
Agnes Deng, ex-fund manager of Standard Life China Equities Fund, joined Baring on 1st September 2007. She replaced Lilian Co to take the lead of Baring Hong Kong China Fund.

Investment Strategy
Baring Hong Kong China Fund applies a bottom-up approach for stock selection, paying particular focus on fundamental analysis and company visits. Amid a fast-moving market, the Fund tries to enhance return through active stock picking and to limit risk by disciplined trading strategy.

The Fund has adopted a flexible approach regarding sector allocation and stock selection.

Portfolio Analysis
As of 5th October 2007, Baring Hong Kong China Fund posted a

93.31 percent year-to-date return with an August-end Sharpe ratio of 2.75, which is the highest in the Morningstar China Equity Category.

As Chinese shares are soaring, the Fund becomes more China centric despite of its name "Hong Kong China". As of July end 2007, the Fund holds around 87 percent China plays. As for non-China plays, the Fund focuses on financials and consumption stocks, like HKEx (5.65 percent), Esprit (1.74 percent), Lifestyle International (1.14 percent) and SHK (0.16 percent). The Fund used to have some exposure to Taiwan market while it sold out the position this March after Taiwan underperforming.

The investment style of the Fund is relatively aggressive as it holds around 75.7 percent of assets in growth stocks as of July end. The growth-biased style helped the Fund outperform its peers in the past. This year the Fund has also purchased some stocks with short listing history, like CSR Times Electric and Anta Sport. Amid a bull market, IPO valuation is not cheap. In addition, the "half new stocks" have short track record, which may add more investment risk. Of course, risky investments come with rosy returns but such strategy should be also closely watched.

Sectorwise, the Fund had no exposure in tech stocks and oil stocks but it was overweight in financials and material stocks. Besides, the Fund is positive with containerboard producers like Nine Dragons and Lee& Man Paper. Given a rosy prospect of containerboard industry, Nine Dragons and Lee& Man Paper have become frequenters of mutual funds' investment universe, but it is somewhat rare for the Fund to purchase both with heavy weights. It is worth noting that these moves are made under Lilian Co's management but not Agnes Deng's, thus a management style shift may be seen in the near-term, where investors should pay particular attention to.

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About Author

YT Kum, CFA  YT Kum is a consultant for Morningstar, contributing to manager selection and asset allocation activities in Asia, and is responsible for providing investment thought leadership on topics relevant to investors in Asia.

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