By Kennix Chim and Jeffrey Hodgson
HONG KONG (Reuters) - Mainland Chinese stocks, down 41 percent since last October, are likely to find a bottom by this quarter or next, a China-focused hedge fund manager who earned triple-digit returns in 2006 and 2007 said on Tuesday.
A slide in valuations and double-digit earnings growth both point to a near-term rebound, though China's price control policies could be a major risk, added Marco Polo Pure Asset Management Chief Executive Aaron Boesky.
"There is a tremendous amount of cash on the sidelines and burgeoning liquidity still coming. We think that a recovery is imminent in the next few quarters," he told the Reuters Hedge Funds and Private Equity Summit in Hong Kong.
"We could see some continued softness in Q2, Q3, but we think ultimately the market will answer back."
The benchmark Shanghai Composite Index .SSEC fell 34 percent in the first quarter, its biggest quarterly loss since 1992 and second worst since China's modern stock market was established at the end of 1990.
The drop marked an end to one of the world's great equities bull markets, during which index jumped over sixfold between June 2005 and last October.
Marco Polo's flagship Pure China Fund, which had $170 million in assets under management at the end of February, is focused entirely on the mainland A-share market.
Launched in September 2004, it lost money that year and the next before rising more than 105 percent in 2006 and 133 percent in 2007. It fell 2.72 percent in the first two months of this year, compared with a more than 17 percent decline in the Shanghai Composite Index .SSEC. Continued...
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