Fund Times: China Markets Meet Skeptics
Plus, news on a PIMCO manager change, Oppenheimer fund closure, and more.
It seems that nearly every day, a news article is touting the breakneck growth in China's economy, and the wide-ranging global economic transformations that are the result of it. However, before jumping into the latest China-focused fund, we'd suggest giving the skeptics' case a listen. Morningstar's reigning International Fund Manager of the Year, David Herro of Oakmark International (OAKIX), recently outlined some of his concerns.
He said there are four main risks in Chinese markets: fundamental valuation, state control, severe environmental problems, and a "bubble-like" financial market. On valuation, Herro wrote: "We seek to invest in companies that are of high quality but also sell at low prices. Today the stocks of Chinese companies represent neither: they are richly priced and are of low quality." For example, he said "bank stocks trade at three times book value and 15-20 times earnings [whereas] most of the banks we own are at 10-12 times earnings and trade at one to two times book value." Herro is concerned about the large amount of bad loans these banks have carried in the past, and whether the lending standards have genuinely changed after a government-sponsored cleanup of the loans took place.
Lawrence Jones has a position in the following securities mentioned above: DODFX. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.