Manufacturing, finance and IT dominate H1 picks, and could spark a rebound

First-half financial reports of more than 100 fund companies revealed stocks they invested in were mainly from three sectors.

Stocks of companies in finance, manufacturing and information technology figured prominently in their selections in the January-June period.

In the same period, funds also focused on many bluechip stocks, which tend to perform well irrespective of market sentiment.

Experts said funds' first-half investment strategy appears to be well-grounded, given their experience in the last few years. They forecast stock markets in the Chinese mainland will rise soon and suggested that investors may want to consider the coming months as an opportune time to buy.

"When the market is down, it is relatively safe to invest in stocks of large and well-established companies with a good profit history, or stocks of companies growing quicker than others in a sector," said Wang Maobin, investment department dean at the University of International Business and Economics in Beijing.

He estimated stock markets in the mainland may rebound in early 2019 as the Chinese economy expands and the impacts of trade tensions and global market trends become more predictable.

According to reports disclosed by the funds, by the end of June, the 10 most heavily held stocks included two finance companies, two liquor producers, and two household appliance manufacturers. The others were stocks of a dairy producer, a real estate player, a pharmaceutical major and a digital media star.

For funds, certain financial stocks, especially bank stocks, were top picks in a volatile market because of their good liquidity, said a fund manager who sought anonymity, according to a report in the 21th Century Business Herald.

In the second quarter, funds increased their holdings of financial companies by 4.06 billion shares, up almost 33 percent from 12.33 billion shares in the previous quarter.

China Everbright Bank, Bank of China, and Industrial and Commercial Bank of China Limited were the top three financial stocks for funds. The latter collectively bought 315 million shares of Everbright, 280 million shares of BOC, and 274 million shares of ICBC.

Ping An Insurance Group Company of China Ltd was the most widely and heavily held stock by funds during the first half.

By the end of the second quarter, 812 funds held Ping An as one of their top 10 most heavily held stocks, with about 640 million shares in their possession, which was still down by 3.77 million shares from the first quarter.

As Ping An's share price slumped in the second quarter, the market value of its shares held by funds was 37.5 billion yuan by the end of the quarter, down by 4.55 billion yuan from the previous quarter.

Funds also bought into stocks of growth companies in hot sectors with significant earnings and growth that outpaced the overall economy.

"Many growth companies' stocks have gained long-term investment value after their stock prices fell in the past months," said Lin Peng, a fund manager at Orient Securities Asset Management Company, in the fund's half-yearly report.

Orient is optimistic about a number of companies with cutting-edge competence. They have been performing well even in complicated circumstances, he wrote in the report.

Wang, UIBE dean, said China has a large number of consumers, and the ongoing consumption upgrade is a key factor. Similarly, the country's IT industry has a global footprint. So, consumer and IT stocks could offer significant growth potential, he said.

Both institutional investors and retail investors would do well to consider investing now as the market is on the verge of bottoming out and appears to be set for a rebound.

Shanghai Securities News quoted Zhou Weifeng, a fund manager with JIC investment Group, as saying that the Chinese economy is shifting to a new stage of development led by consumption upgrade and technology innovation, so stocks in related areas, including medicine, home decoration, new energy vehicles and industrial automation, may prove good picks.