By Nishant Kumar and Muralikumar Anantharaman
HONG KONG, Oct 28 (Reuters) - A graft investigation focusedon PetroChina, Asia's largest energy company by market value,has prompted starkly different reactions from two of Asia's topfund managers.
Shares in PetroChina, have fallen 10 percent sinceAugust, when the scandal first broke around the company and itsparent, China National Petroleum Corp (CNPC).
Having been strongly bullish on PetroChina for severalyears, Franklin Templeton decided it was time to sell. InSeptember, the $14.5 billion Templeton Asian Growth Fund andTempleton China Fund both dropped PetroChina from their lists oftop ten bets.
Aberdeen Asset Management, however, has kept faith,accumulating more shares, in expectation that once the scandalpasses the stock's strengths would return to the fore.
Their different takes on the outlook for the company, whosemarket value of $226.5 billion beats Royal Dutch Shell,reflects uncertainty over whether a crackdown on high-levelcorruption will undermine stability in state-backedinstitutions.
SOUNDING RETREAT
Beijing revealed between late August and early Septemberthat five former executives at PetroChina and CNPC were beinginvestigated for "serious discipline violations", a shorthandgenerally used to describe graft.
"We have always been aware that there have been someproblems of this nature in the state owned companies," Templeton's Mark Mobius, said in an e-mail.
Templeton Asian Growth Fund had made PetroChina its biggestsingle holding for the most of the past three years, accordingto fund tracker Lipper, a Thomson Reuters company, but Mobius isnow looking for value elsewhere.
"We may be finding stocks which are cheaper and betterbargains than PetroChina," Mobius, executive chairman ofTempleton Emerging Markets Group, said.
PetroChina was trading at 9.2 times forward 12-monthearnings, 9.5 percent below its 10-year median, according toStarMine data.
But, Templeton Asian Growth Fund documents show just how bigits switch out of the stock has been.
At the end of June the fund had holdings of $870 million inPetroChina, but three months later, despite an increase in theshare price, holdings in PetroChina were less than $479.3million. And, as of the end of September, PetroChina accountedfor less than 3.3 percent the fund's total assets.
A spokeswoman for Templeton declined to disclose the numberof PetroChina shares now held.
Mobius said he has "not given up PetroChina" and the reducedholdings may be a result of a combination of factors, includingredemptions which require the fund to sell.
ADVANCING STEADILY
In contrast, Aberdeen's $9 billion Asia Pacific Equity Fundis sticking with its exposure after raising bets in early 2013.
It has steadily added PetroChina shares in its $3.5 billionChina fund, increasing allocation by 72 percent to 132 millionshares through August this year and maintaining a 4.5 percentallocation in the portfolio, the data showed.
Nicholas Yeo, head of equities for China and Hong Kong atAberdeen, said PetroChina's corporate governance has actuallyimproved since it started investing in the company.
The probe "could be a trigger for more changes. We areexpecting steps to improve governance," said Yeo. "If someone iscaught in PetroChina, the company is still around."