Zhang Kun, China’s biggest fund manager, raised bets on liquor distillers, sold tech giants Tencent, Meituan in third quarter

E Fund Management’s Zhang bet on companies he considers best equipped in their industries to navigate the turmoil roiling capital markets
His fund returned 1.6 per cent last quarter, while the CSI 300 Index fell 4 per cent and the Hang Seng Index lost 5.9 per cent

China stock market

Zhang Shidongin Shanghai

Published: 7:00am, 26 Oct 2023

Why you can trust SCMP

Zhang Kun, China’s biggest fund manager, increased his holdings of liquor distillers and trimmed his position in technology companies in the third quarter, betting on companies he considers the best equipped in their respective industries to navigate the turmoil roiling capital markets.

Zhang’s US$6.7 billion E Fund Blue Chip Selected Mixed Fund bought shares of distilleries Wuliangye Yibin and Jiangsu Yanghe Brewery Joint-Stock between July and September, while paring its exposure to Tencent Holdings and Meituan, the offshore listed tech stocks that are most susceptible to headwinds overseas, according to its quarterly portfolio report released on Wednesday.

China’s economy should stabilise after a flurry of policy loosening measures in the third quarter, including cuts in the loan prime rate and in down payments for home purchases and mortgage rates, Zhang, who works for Guangzhou-based E Fund Management, said in the report.

His fund returned 1.6 per cent in the three-month period ending September 30, while the CSI 300 Index fell 4 per cent and the Hang Seng Index lost 5.9 per cent.

“We are sticking to the good quality companies that have decent business modes, clear industry landscapes and strong competitiveness,” Zhang said in the fund’s quarterly report. “The valuations of these good quality companies are generally very attractive.”

Zhang Kun’s fund returned 1.6 per cent in the three-month period ending September 30, defying a 4 per cent decline in the CSI 300 Index. Photo: SCMP Handout

His blue chip fund, which he has been running since 2018, is bigger than any other stock-focused product in China’s 28 trillion yuan (US$3.8 trillion) mutual-fund industry.

His strategy is likely to be tested this quarter as some of China’s bellwether listed companies start to drop, tracking losses in the broader market. Shares of baijiu liquor giant Kweichow Moutai, one of the most popular bets among investors, have slipped 6.7 per cent this month.

Zhang bought an additional 2.56 million shares in Wuliangye, Kweichow Moutai’s biggest rival, in the third quarter and increased his fund’s stake in Yanghe Brewery, a smaller peer, by 3 million shares, according to comparisons between the fund’s second- and third-quarter reports.

The two stocks were the fund’s second- and fourth-largest holdings by the end of September, each representing more than 9 per cent of the fund’s investments by value, the latest report showed. They fell 4.6 per cent and 1.5 per cent respectively last quarter.

Meanwhile, Zhang cut his position in WeChat operator Tencent by 300,000 shares and sold one million shares of food delivery giant Meituan in the three-month period, the report showed. The two stocks remained among the top 10 holdings, with weightings of 9 per cent and 5.1 per cent respectively.

In other adjustments to the portfolio, Zhang unwound his holdings of dairy producer Inner Mongolia Yili Industrial Group, which dropped off the list of the top 10 holdings at the end of the last quarter. He had held 116 million Yili’s shares in the previous quarter, making it the seventh-largest constituent.

Companies undertaking corporate actions such as buy-backs to shore up their stock prices, and those enjoying the buying support of state-backed shareholders, should command higher market valuation, Zhang said.

Dozens of listed companies, including those owned by the central government, have been taking such actions recently, as stocks and valuations have tumbled.