By Nishant Kumar and Muralikumar Anantharaman

HONG KONG (Reuters) - A graft investigation focused on PetroChina, Asia's largest energy company by market value, has prompted starkly different reactions from two of Asia's top fund managers.

Shares in PetroChina <0857.HK>, have fallen 10 percent since August, when the scandal first broke around the company and its parent, China National Petroleum Corp (CNPC).

Having been strongly bullish on PetroChina for several years, Franklin Templeton decided it was time to sell. In September, the $14.5 billion (8.9 billion pounds) Templeton Asian Growth Fund and Templeton China Fund both dropped PetroChina from their lists of top ten bets.

Aberdeen Asset Management, however, has kept faith, accumulating more shares, in expectation that once the scandal passes the stock's strengths would return to the fore.

Their different takes on the outlook for the company, whose market value of $226.5 billion beats Royal Dutch Shell <RDSa.L>, reflects uncertainty over whether a crackdown on high-level corruption will undermine stability in state-backed institutions.


Beijing revealed between late August and early September that five former executives at PetroChina and CNPC were being investigated for "serious discipline violations", a shorthand generally used to describe graft.

"We have always been aware that there have been some problems 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 biggest single holding for the most of the past three years, according to fund tracker Lipper, a Thomson Reuters company, but Mobius is now looking for value elsewhere.

"We may be finding stocks which are cheaper and better bargains than PetroChina," Mobius, executive chairman of Templeton Emerging Markets Group, said.

PetroChina was trading at 9.2 times forward 12-month earnings, 9.5 percent below its 10-year median, according to StarMine data.

But, Templeton Asian Growth Fund documents show just how big its switch out of the stock has been.

At the end of June the fund had holdings of $870 million in PetroChina, but three months later, despite an increase in the share price, holdings in PetroChina were less than $479.3 million. And, as of the end of September, PetroChina accounted for less than 3.3 percent the fund's total assets.

A spokeswoman for Templeton declined to disclose the number of PetroChina shares now held.

Mobius said he has "not given up PetroChina" and the reduced holdings may be a result of a combination of factors, including redemptions which require the fund to sell.


In contrast, Aberdeen's $9 billion Asia Pacific Equity Fund is sticking with its exposure after raising bets in early 2013.

It has steadily added PetroChina shares in its $3.5 billion China fund, increasing allocation by 72 percent to 132 million shares through August this year and maintaining a 4.5 percent allocation in the portfolio, the data showed.

Nicholas Yeo, head of equities for China and Hong Kong at Aberdeen, said PetroChina's corporate governance has actually improved since it started investing in the company.

The probe "could be a trigger for more changes. We are expecting steps to improve governance," said Yeo. "If someone is caught in PetroChina, the company is still around."

(Reporting by Nishant Kumar; Editing by Michael Flaherty and Simon Cameron-Moore)