While the most dominant theme during Wednesday’s Ira Sohn Hong Kong conference seemed to be Japan, according to China Money Network, another play seemed to be quite popular with the presenters – going long Chinese brokerages.
Much like the long financials/short rates trade popular in the U.S. just before the Fed initiated ZIRP, Asian hedge fund managers are betting that brokerages would benefit from a prolonged period of monetary easing in the region – but with the added bonuses of an economy transitioning from being bank loan-driven to one more capital market-centric, a fast-growing retail and foreign investor market, as well as the country’s incipient inclusion to several global investment indices.
Adam Levinson of Singapore-based hedge fund Graticule Asset Management Asia picked three Chinese brokerages: Haitong Securities, China Galaxy Securities, and CITIC Securities. China Money wrote about Levison:
“Even after discounting the current market frenzy, Levinson believes future trading will far outpace what is currently being used to value Chinese brokers. Haitong Securities, for example, are valued based on turnovers under RMB500 billion (US$80.1 billion).
Saga Tree Capital Advisors’ Catherine Tan was also a fan of the trade, recommending Hong Kong-based financial services firm Sun Hung Kai & Co.
With regulators expected to cut rates even further amidst a struggling economy, this trade just might grow monster legs.
Photo credit: Sarah Joy via Flickr