Insurers and coal best China bets: Mirae Asset

By Jeffrey Hodgson

HONG KONG (Reuters) - Coal producers and insurers, both poised to profit from China's energy-hungry but aging population, are among the best potential China plays for global investors, a Mirae Asset fund manager said.

But the country's big banks and oil companies should be approached with caution, given their less impressive profit outlook, Li Cong, manager of the $2 billion Mirae Asset China Solomon Fund, said late on Tuesday.

"With the banking sector, I think the growth will be very high for the next few years. But I more prefer the medium-sized banks like China Merchants Bank (3968.HK: Quote, Profile, Research, Stock Buzz) (600036.SS: Quote, Profile, Research, Stock Buzz)," he said during the Reuters China Century Summit in Hong Kong.

"Markets leaders like ICBC or CCB (China Construction Bank) (0939.HK: Quote, Profile, Research, Stock Buzz), fundamentally they are very good, but in terms of the stock performance, you need smaller banks where growth might be higher."

Mirae Asset, one of South Korea's largest mutual fund managers, has $51 billion of assets under management at its fund management arms.

The China Solomon Fund, held mainly by the country's retail investors, has returned 72 percent since its launch in March, 2006, compared with a 65.9 percent rise in its benchmark, the MSCI China Index .MSCICN.

The fund's largest holdings at the end of July included China Life Insurance Co. (2628.HK: Quote, Profile, Research, Stock Buzz) (LFC.N: Quote, Profile, Research, Stock Buzz), China Mobile (0941.HK: Quote, Profile, Research, Stock Buzz) (CHL.N: Quote, Profile, Research, Stock Buzz), Ping An Insurance (2318.HK: Quote, Profile, Research, Stock Buzz), Industrial and Commercial Bank of China (1398.HK: Quote, Profile, Research, Stock Buzz) (601398.SS: Quote, Profile, Research, Stock Buzz) and China Merchants Bank.

China Life, the country's top life insurer, last month posted a 160 percent increase in first-half profit, topping forecasts, on the back of stock-infused investment gains and rising premiums.

Ping An, China's second-largest life insurer, also topped forecasts last month with a 140 percent gain in first-half profit.

But Li, a chartered public accountant who holds a doctorate in business administration, said he was more attracted to the sector's long-term outlook.

"The penetration rate is very low per capita compared with other countries ... and the growth rate of the sector is very high," he said.

"(You have) high growth, low penetration and also the insurance sector will benefit most from asset (market) formation in China."

HUNGER FOR HYDROCARBONS

Another favorite is the coal sector, where his holdings include producer China Coal Energy (1898.HK: Quote, Profile, Research, Stock Buzz).

In China, the world's largest producer and consumer of coal, demand for the dirty hydrocarbon has nearly doubled in the past five years. Coal accounts for about 70 percent of primary energy consumption in the world's fourth-largest economy.  Continued...