Top China Fund Manager Bets on Tech as Beijing Tightens Grip

(Bloomberg) — One of China’s largest mutual fund companies is betting on the nation’s internet giants, just as a clampdown by Beijing sends shockwaves through the sector.

China Asset Management Co. on Friday completed fundraising for its approximately 400 million yuan ($62 million) Internet Leading Enterprises Mixed Fund, saying it sees an opportunity to build positions amid market pessimism in the wake of China’s drive to rein in its biggest technology companies.

“Short-term blows to sentiment have brought about a great buying opportunity”, said Tu Huanyu, the product’s manager. He added that the fundraising process was “difficult” given sentiment toward the industry.

One of the products Tu manages, the China AMC Innovation Frontier Equity Fund, has returned 15% this year, beating 69% of peers. The nation’s fourth-largest mutual fund manager, China Asset Management oversees 540 billion yuan of mutual fund products, excluding money market funds, according to the latest company data as of the end of March.

A gauge of Hong Kong-listed tech stocks is down more than 30% from a February peak. Tencent Holdings Ltd. and Alibaba Group Holding Ltd. have been the largest drags on the Hang Seng Index in the past three months, both falling by at least 11%. Tencent is trading at less than 28 times forward earnings, compared with nearly 40 times in January.

On Monday, the Hang Seng Tech gauge dropped 2.4%, its biggest decline in over a week.

Beijing has sought to impose stricter controls over the nation’s technology firms, many of which have near-monopolies in their fields and vast pools of user data. Since last year, President Xi Jinping’s government has acted to rein in these corporations — from derailing Ant Group’s blockbuster IPO to new rules curbing monopolistic practices across the internet landscape. A clampdown on overseas listings was triggered by Didi Global Inc.’s decision to push ahead with a New York listing despite objections from regulators.

The new fund’s inception date is yet to be determined. With up to 95% of assets in stocks, most of its non-cash holdings would be invested in leading internet firms and related companies that could maintain a competitive edge, according to its mandate. The fund can invest up to 50% of its stock holdings in Hong Kong-listed shares via the trading link with the city’s market. Tu declined to elaborate on planned holdings.

“The industry is at a stage where internet giants have reached a high weighting and significance in the global economy, and they need to take on greater social responsibilities,” said Tu. “Buying during these short-term challenges will boost our future prospects of returns.”

(Adds Hang Seng Tech Index performance in paragraph 6)

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Roy Walsh

Roy Walsh

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