Chinese Hedge Fund Surges 800% in Seven Years, Capitalises on Dip in Tech Stocks

A prominent Chinese hedge fund, Shenzhen Huaan Hexin Private Investment Fund Management Co., is seizing the opportunity to buy into Hong Kong-listed technology stocks after a recent market dip. The fund, which has seen an impressive 800% increase over the past seven years, believes that current valuations remain attractive despite a recent rally in the sector.

Key Takeaways

• Shenzhen Huaan Hexin has nearly 6 billion yuan (£849 million) under management.
• The Hang Seng Tech Index experienced a 14% drop earlier this week, prompting the fund to buy more tech stocks.
• The fund’s flagship product surged 35% in the last week of September, bringing its year-to-date return to 60%.
• Yuan Wei, the fund’s founder, sees the recent market correction as a buying opportunity.

Hedge Fund Performance

The Huaan Hexin Stable fund has been a standout performer, achieving a remarkable 825% total gain since its inception seven years ago. This performance is particularly notable given the backdrop of a challenging economic environment for many tech firms.

• Recent Performance Metrics:
  • September Surge: 35% increase in the last week of September.
  • Year-to-Date Return: 60% as of September 30.

Market Dynamics

The recent surge in Chinese tech stocks can be attributed to the government’s announcement of an economic stimulus package, which has revitalised investor interest in the sector. The Hang Seng Tech Index, which tracks 30 major Chinese tech firms, has seen a more than 50% increase since mid-September, although it has recently pulled back.

Yuan Wei emphasises that the market is rebounding from a bearish phase, suggesting that many stocks are still undervalued. He believes that the current economic stimulus measures will positively impact the tech sector, particularly for companies like Tencent Holdings Ltd., Alibaba Group Holding Ltd., and Meituan, which he considers to be “safe havens.”

Future Outlook

Looking ahead, Yuan sees a 50% chance that the onshore market is entering a bull run rather than just experiencing a short-term rebound. He notes that the future performance of the market will largely depend on the effectiveness of government measures aimed at revitalising the property sector.

• Key Factors Influencing Future Performance:
  • Impact of economic stimulus on tech profitability.
  • Recovery of the property sector.

Yuan’s investment strategy primarily focuses on Hong Kong-traded stocks, which he has held since last year. He has also begun acquiring shares in a Chinese manufacturing firm, citing its growth potential and low valuations as key reasons for the investment.

Conclusion

As the Chinese hedge fund continues to navigate a volatile market, its strategy of capitalising on dips in tech stocks reflects a broader confidence in the sector’s long-term growth potential. With a strong track record and a keen eye for undervalued opportunities, Shenzhen Huaan Hexin is positioning itself for continued success in the evolving landscape of Chinese technology investments.

Sources

• Chinese Hedge Fund Up 800% in Seven Years Buys Dip in China Tech Stocks – Bloomberg, Bloomberg.com.