China recovery looms large at Sohn 2023 hedge fund conference

Boe Varitronix

18/05/2023 09:19

By Summer Zhen and Xie Yu
       HONG KONG, May 18 (Reuters) - Asia-focused hedge funds
are growing more bullish on Chinese markets and looking at
sectors such as education, hydropower and electric cars, even as
other global money managers prefer to wait for firmer signs of
an economic recovery.
    Seven out of 15 hedge funds at the annual Sohn Hong Kong
Investment Leaders Conference this week pitched China-related
investment ideas, a sharp contrast to last year when the world's
second-largest economy was still under COVID-19 lockdowns and
barely mentioned.
    Seth Fischer, founder and CIO of Oasis Management, a
long-term investor in Asia, dismissed the idea that China is
uninvestable and said he has set his sights on the higher and
vocational education sector, which is not affected by Beijing’s
ban on after-school tutoring since 2021.
    "Vocational education is like a backbone in terms of the
workforce of China," Fischer said. "It serves society". 
    Seth predicts a doubling of share prices of China Education
Group  0839.HK  and New Higher Education  2001.HK , and also
likes China Yuhua Education's  6169.HK  convertible bonds.
    While Chinese stock markets  .CSI300  have bounced off their
October lows after the reopening, the optimism has been deflated
by an uneven economic recovery. Foreign investors have trimmed
exposure to avoid economic and geopolitical risks.
    However, China's reopening was a key theme at the first
in-person Sohn conference since 2019, which invites funds in
Asia to pitch their top investment ideas.
    "We see it in secondary property auctions, in manufacturing,
they're slowly returning back to business," Fischer told
Reuters.
    Richard Lawrence, who founded Overlook Investments Group in
Hong Kong in 1991 and has more than $6 billion under management,
steered the investment audience to state-owned enterprise China
Yangtze Power  600900.SS , a hydroelectric power facility
operator that he called China’s "climate change blue chip".
    Lawrence hailed the company’s profit margins, long-term
growth prospects, and capital management as reasons for betting
on a company with a $80 billion market cap. "There is nothing
that comes close to it, in fact, globally," he said.
    Triata Capital, an emerging China-focused hedge fund
launched in 2021 that returned 23% last year, believes short
video social platform Kuaishou Technology is undervalued.
    Triata founder and CIO Sean Ho said he is not considering
diversifying focus away from China and is keen on the artificial
intelligence and restaurant sectors. 
    Eric Wong, founder of New York headquartered Stillpoint
Investments, recommends LBX Pharmacy  603883.SS , previously a
laggard among China's top drug chains.
    Companies set to be benefit from the booming electric
vehicles (EV) demand were also a hot theme. Edward Lei of
Astroll Management, a former partner at Tiger Global,
recommended Guangdong-based BOE Varitronix  0710.HK , an
automotive display leader, which is well placed to gain market
share from Japan and Korea players.
    Fei Sun, founder of Epimelis Capital suggested a spread
trade between EV giant BYD’s China A-shares  002594.SZ  and Hong
Kong-listed H-shares  0285.HK , an opportunity created by
foreign investors unwinding BYD’s Hong Kong shares.

 (Reporting by Summer Zhen and Xie Yu in Hong Kong
Editing by Vidya Ranganathan and Sam Holmes)
 ((summer.zhen@thomsonreuters.com; 852-3462-7739;))