Chinese money managers added holdings of new-energy, pharmaceuticals and small liquor distillers in the third quarter, while trimming positions in technology juggernauts and companies with exposure to the property industry, according to mutual funds’ quarterly reports.
Sungrow Power Supply, WuXi AppTec and Shanxi Xinghuacun Fen Wine Factory were among fund managers’ biggest increases in holdings in the past quarter, the reports showed. Tencent Holdings, the Chinese social-media giant trading in Hong Kong, Industrial Bank and Beijing Oriental Yuhong Waterproof Technology bore the brunt of the sell-offs in the period.
The repositioning offers an insight into how money managers were navigating through a raft of headwinds – accelerating inflation, China Evergrande Group’s debt woes, the power outage and the continuing fallout of the regulatory crackdown – that roiled stocks over the past month.
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The total assets managed by China’s mutual funds increased 4 per cent from the previous quarter to 23.4 trillion yuan (US$3.7 trillion) at the end of September, with 6.4 trillion yuan allocated to stocks, according to the data by Eastmoney.com. The industry’s equity holdings accounted for about 7 per cent of the total values of the companies trading on the onshore markets.
China’s Shanghai Composite Index lost 0.6 per cent in the third quarter, as the diversity of the industries the listed companies are engaged in provided shelter from Beijing’s unprecedented scrutiny of the technology industry. In comparison, Hong Kong’s Hang Seng Index had a brutal quarter, slumping 15 per cent, as about a third of the market caps of the companies on the benchmark were directly exposed to the regulatory onslaught.
“The mutual funds are embracing the new era of low carbon,” analysts Dai Kang and Zheng Kai at GF Securities wrote in a report. “Their investment theme is green energy and the cycle of energy consumption.”
Fund managers boosted holdings of Shenzhen-listed Sungrow, a maker of inverters for solar and wind power, by 47 per cent quarter on quarter, according to Eastmoney. They also bought into BYD, the electric-car marker backed by Warren Buffett, and Hong Kong-listed Geely Automobile Holdings, riding on the government’s drive to cut carbon emissions.
Shanxi Fen Wine, Anhui Gujing Distillery and other smaller baijiu distillers were also back in favour because of their attractive valuations. Still, fund managers remained cautious about luxury liquor on concerns about the possible levy of a consumption tax as part of China’s common prosperity drive. They pared holdings of Kweichow Moutai by 0.6 per cent and Wuliangye Yibin by 11 per cent in the third quarter.
Funds’ holdings of Contemporary Amperex Technology, the world’s biggest maker of lithium ion batteries for new-energy vehicles, were unchanged in the span.
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