Buffett disciple Zhao Danyang earns 20pc gains with China stocks

Zhao Danyang, the mainland investor who won a charity lunch with Warren Buffett in 2008, led his hedge funds to post returns three times more than their Asian rivals this year by shifting assets back to Chinese stocks.

Zhao's Hong Kong-based Pureheart Capital Asia has more than 80 per cent of its US$217 million in Chinese stocks traded in Hong Kong, Singapore, the United States and at home from 50 per cent at the start of the year, said Jerrie Huang, its business development manager.

The US$162 million Pure Heart Value Investment Fund returned 24 per cent in the seven months this year, Huang said. The Eurekahedge Asian Hedge Fund Index rose 8 per cent.

Pureheart returned to Chinese stocks after six years of corrections cut their valuation close to historical lows, Huang said. It decided in January 2008 to liquidate all five funds that specialised in yuan shares, with combined assets of about US$200 million, because it could no longer find any attractive investment opportunities.

"There is no doubt that the China stock market is still in a bear market," Pureheart said in a newsletter to investors last month, adding it marked a "good time for optimists" like itself. "The falling share prices will provide a very good opportunity for us to buy the carefully selected shares at a bargain."

The benchmark Shanghai Composite Index shed 61 per cent of its value from late December 2007 to the end of last week and the H-share index fell 40 per cent.