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Five stocks powering Premier's top rated China fund

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by Annabelle Williams on Feb 15, 2013 at 07:00

From little emperors to massive cardboard boxes, Premier's Fen Sung shows off the stocks driving his top performing China fund.

Investing in China has not been the easiest play for investors over the last year, as mixed signals on the strength of the country's economy has made for a volatile ride on the Shanghai Stock Exchange.The Premier China Enterprise fund has done well out of the market, as manager Fen Seng returned 18.15% compared to 17.26% in benchmark MSCI Golden Dragon TR USD to be ranked second out of 20 in the Greater China sector. Here Sung gives a run down of the best local stocks driving his top-tier performance.

Lee & Man Paper

With many hoping global growth is set to return this year, Sung has been looking for a way to access the return of healthy export levels in China

Lee & Man Paper owns factories on the mainland making cardboard sheets so big they are used to box up machinery.

Sung invested in this Hong Kong-listed company in 2012 and has already made a 60% return on the stock, and says this would feature in his fund’s top 10 if he was not restricted in the percentage of mid-caps he can hold.

‘It’s actually a fantastic barometer of whether exports are recovering, and also the domestic market as well, and in September they actually raised their prices,’ he said.

Prince Frog

Many investors looking to tap the burgeoning middle class in China have turned to luxury brands like Burberry and LVMH.

However, with some of these European names struggling to maintain sales of high end products, Sung turned to a company providing more affordable luxury.

Prince Frog makes toiletries especially for children, and with parents are willing to spoil their only child even if the shampoos and moisturisers are on the expensive side.

‘Because the single child policy has been in place since the 80s, the products are about 20% more expensive. But parents are willing to spend a little bit extra,’ he said.

‘The sales have been excellent and they are gaining market share. I’m hoping that if the government relaxes the one child policy their sales will grow.’

MIE Holdings

Sung likes this oil exploration company because it operates independently of the Chinese government and he expects the oil price to remain high.

‘They explore for oil and as soon as they get it out of the ground they sell it on the open market, so they will directly benefit when oil prices increase.

'I like them because they are an independent company not related to the Chinese government. Oil prices are going to remain high – if you look at the big oil producing countries they need oil to over $80 a barrel to balance their budgets.'

TPK Holdings

The continuing dominance of mobile technology is indisputable, and from all the companies playing the theme, Sung bought this touch-screen technology company because it has a lean and profitable business model.

‘They are the most efficient. There are five major players globally and they all tend to do business for Apple but TPK have the best return on equity and that’s why they tend to be winners,’ he said.

‘I also know the chief financial officer and I like him; he’s very honest.’

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