(Bloomberg) -- An emerging-market stock fund that’s beating most rivals is sticking with shares of Chinese white goods makers and banks amid sluggish economic growth.
China’s lenders and some consumer-facing firms are still alluring amid a spending slowdown and a housing crisis, according to Lazard Asset Management’s Ganesh Ramachandran. His $1 billion Lazard Emerging Markets Fund is outperforming 94% of peers over the past three years, data compiled by Bloomberg shows.
Such companies “don’t need high speed, red-hot growth,” he said in an interview. “We continue to stay in those places where we find very attractive opportunities and we find better downside protection” against geopolitical tensions and economic concerns.
Chinese consumption remains soft amid an ongoing housing downturn. The nation’s government on Saturday laid out its priorities to boost spending as weak domestic demand weighs on growth.
While the fund offloaded Chinese real estate shares a few months ago, it has indirect exposure to the property market through home goods companies like Gree Electric Appliances Inc. and Midea Group Co.
“I do not know the exact timeline of recovery, how effective these policies are” in supporting the housing market, Ramachandran said. “So this is a much safer way to play it.”
This month’s global market swoon hasn’t altered the fund’s strategy. “We continue to look for opportunities that these bouts of market volatility create,” he said.
China Construction Bank Corp. is the fund’s second-largest overweight holding, next to the Taiwan Semiconductor Manufacturing Co. Ramachandran said the fund holds banks that are “very, very new to growth.”
Despite some lenders that are loss-making, a sub-gauge of the country’s financials stocks has gained 6.4% this year, outperforming the broader MSCI China Index.
“These are banks that are seasoned operators, they’ve known to manage their credit quality risks quite well,” said Ramachandran. “So we find that we’re OK buying them and waiting for the sentiment to change.”
The fund recently initiated positions in technology firms like Alibaba Group Holding Ltd., Tencent Holdings Ltd., and JD.com Inc. as their share prices dropped and capital discipline improved. Still, Ramachandran isn’t planning on adding more Chinese tech shares just yet due to geopolitical risks and valuations.
--With assistance from Jeanny Yu.
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