The Cape Town-based manager said the undervalued stocks presented a strong investment opportunity even though he labelled it a ‘brave move’ in his most recent market commentary.
Speaking to Citywire Global, Kooyman said he had concentrated on the country’s three largest banks: Bank of China, China Construction Bank and Industrial and Commercial Bank of China.
‘You might ask why? Two reasons: the probability is high that the Chinese economy has bottomed and could surprise positively over the next 12 months,’ he said. ‘Also, valuations are at a historic low.’
Kooyman, who last held Chinese banks in December 2010 before selling them in January 2011, said he had been prevented from taking a larger position in the banks due to quality concerns.
‘However one must bear in mind that the largest percentage of loans is to state-owned enterprises, which the Chinese government cannot allow to fail, simply because it will have a massive impact on the rating of Chinese sovereign debt.’
‘So with that in mind, we felt we are most probably over-pessimistic when looking at the bad debt charges we have modeled in for the next two years. However, even with those charges predicted, the banks still seem to be mispriced.’
Combined, the three Chinese bank holdings make up 3% of his overall portfolio. The largest positions at present are in Thai banking firm Tisco Financial (5.39%), Turkish development bank TSKB (4.85%) and the UK-based insurance provider Lancashire Group (4.41%).
Despite Kooyman expecting a turnaround in Chinese growth, he said he has also held back from investing more as he is waiting to see whether his theory stands up.
'For a while we have no way of knowing whether our reasoning is right or not,’ he said.
'In that regard, we have a much higher percentage of the fund exposed to Indian government-owned banks that are even cheaper and where one gets greater transparency via access to management and government.’
Last month Kokkie Kooyman revealed he would be considering the launch of a distressed fund having profited from the slump experienced by UK bank Barclays over the summer.
The Sanlam Global Financials fund has returned 65.45% in the three years to the end of October 2012. Over the same period its Citywire benchmark, the MSCI World/Financials TR, rose 21.35%.