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

Abbie Windsdale

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Investors discussing in front of a city skyline at dusk.

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) in assets under management.
  • The Hang Seng Tech Index experienced a 14% drop over two days, prompting the fund to buy more tech stocks.
  • The fund’s flagship product surged 35% in late September, contributing to a 60% return for the year.
  • Yuan Wei, the fund’s founder, sees the current market as undervalued and a buying opportunity.

Market Context

The Hang Seng Tech Index, which tracks 30 major Chinese tech firms, has seen significant fluctuations recently. After a robust rally fueled by government stimulus measures, the index surged over 50% since mid-September before experiencing a pullback. This volatility has created a buying opportunity for investors like Huaan Hexin, who are looking to capitalize on the sector’s potential.

Yuan Wei, the founder and fund manager, stated, "Such a correction is more like a buying opportunity. If you compare to their fundamentals, the stocks remain very cheap." This perspective reflects a broader sentiment among long-only hedge funds that have shifted their focus to technology stocks, which were previously favored by short sellers.

Performance Highlights

  • Fund Performance: The Huaan Hexin Stable fund has achieved a remarkable 825% gain since its inception seven years ago.
  • Recent Gains: The fund’s performance in September was particularly noteworthy, with a 35% surge attributed to the rally in internet stocks like Meituan.
  • Market Recovery: Yuan believes the market is rebounding from an extremely bearish level, indicating that the bear market may have ended.

Future Outlook

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

Yuan also highlighted that major internet firms such as Tencent Holdings Ltd., Alibaba Group Holding Ltd., and Meituan are becoming increasingly attractive as "safe havens" due to their strong profit elasticity, which he believes will outpace any macroeconomic challenges.

Investment Strategy

The fund’s strategy involves primarily investing in Hong Kong-traded stocks, many of which have been held since last year. Recently, the firm has also begun acquiring shares in a Chinese manufacturing company, citing its growth potential and low valuations as key factors in the decision.

Yuan’s investment acumen has earned him top rankings among hedge fund managers, and he continues to be a significant player in the Chinese investment landscape. As the market evolves, his insights and strategies will be closely watched by investors seeking to navigate the complexities of the Chinese tech sector.

Sources

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