Economics & Strategy: Portfolio Strategy - Second

Although he drops one notch to second place, Frank Li retains a loyal following.

SECOND TEAM

Frank Li J.P. Morgan

Although he drops one notch to second place, Frank Li retains a loyal following. In April 2010 the J.P. Morgan strategist informed clients that “despite our short-term bullish view on China equities, we maintain that China’s excessive liquidity growth this year — down from 21 percent in fiscal 2009 to an estimated 5 percent in fiscal 2010 — may not warrant a sustainable big rally.” However, he remained optimistic about banks and insurance firms, small- and midcap companies and consumer discretionary stocks. In the latter sector, he noted, “the menswear segment is still not well developed in China in terms of consumption per capita ($291 per annum in China, compared with $1,175 in the U.S. and $1,489 in Europe)” and thus has “significant room for growth, as Chinese men become more brand- and fashion-conscious.” He dubbed Hong Kong’s Trinity among the companies likely to benefit from this trend, and he was right. The stock had soared from HK$5.92 to HK$8.48 by the end of April 2011, a gain of 43.2 percent that bested the broad market by 38.7 percentage points. “His calls on new-economy plays such as China’s luxury-consumption market performed well last year,” observes one backer.

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