Wong Kok Hoi, founder and chief investment officer at APS Asset Management. Photographer: Dale de la Rey/Bloomberg

Dec. 9 (Bloomberg) — APS Asset Management, which invests more than $2 billion in Chinese stocks, expects the country’s stock markets to extend this year’s rally even without extra government stimulus.

The CSI 300 Index has increased 26 percent since the People’s Bank of China cut interest rates for the first time since 2012 on Nov. 21, bolstered by speculation the government will take more measures to support the economy. Chinese stocks may gain as much as 20 percent over the next 12 months, Wong Kok Hoi, founder and chief investment officer of Singapore-based APS, said in an interview on Dec. 4.

“China doesn’t need a stimulus,” Wong said. “China’s problem is not a lack of liquidity; China’s problem is restructuring and reform. And the markets are beginning to realize that those reforms are taking effect. The markets are bullish now. We will continue to do well.”

President Xi Jinping is seeking to give the market a bigger role in the $9 trillion economy after the Chinese ruling Communist Party in November last year decided on the most sweeping set of reforms since the 1990s, including land reforms and private investments in state businesses.

APS’s biggest fund, the APS China A Share Fund, and related accounts under the same strategy returned 6.4 percent after fees this year to the end of October, less than the 7.7 percent gain by the CSI 300 Index, which tracks shares traded in Shanghai and Shenzhen, China’s two biggest bourses.

The long-only fund with assets under management of $2.2 billion has returned 315 percent after fees since its inception in July 2004 to end of October, outperforming the 130 percent gain of the index.

Attracting Investors

The long-short APS Asia-Pacific Hedge Fund, with $400 million of assets, has returned a net 7.1 percent this year through October. Shorting involves selling borrowed stocks in anticipation of buying them back for a profit when their prices fall.

APS, which had inflows of more than $1 billion in 2013, expects to raise about the same amount next year after collecting about $100 million this year, Wong said. Inflows can vary widely from year to year due to the limited number of institutional shareholders targeted by APS, the company said. The firm’s assets were $3.15 billion at the end of October.

“Investors all have come to Asia to do their due diligence,” Wong said. “But they have not quite pulled the trigger. People are still not very bullish on Asia.”

Founded in 1995, APS serves institutional investors such as pension funds, endowments, foundations, family offices, funds of funds, and sovereign wealth funds, Wong said. More than half of the investors are based in North America, with the remainder evenly split between Asia, Europe and Australia, he said.

Wong, who worked for Singapore’s state fund GIC Pte from 1981 until 1985, said he likes information security firms such as Beijing Venustech Inc.

Wong said he is bullish on some consumer discretionary stocks and bearish on some consumer non-discretionary stocks, especially food and beverage shares, including Hong Kong-listed Want Want China Holdings Ltd. and Tingyi (Cayman Islands) Holding Corp.

To contact the reporter on this story: Klaus Wille in Singapore at kwille@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net Marcus Wright