ASIA-FOCUSED hedge funds are growing more bullish on Chinese markets and looking at sectors such as education, hydropower and electric cars, even as other global money managers prefer to wait for firmer signs of an economic recovery.

Seven out of 15 hedge funds at the annual Sohn Hong Kong Investment Leaders Conference this week pitched China-related investment ideas, a sharp contrast to last year when the world’s second-largest economy was still under Covid-19 lockdowns and barely mentioned.

Seth Fischer, founder and CIO of Oasis Management, a long-term investor in Asia, dismissed the idea that China is uninvestable and said he has set his sights on the higher and vocational education sector, which is not affected by Beijing’s ban on after-school tutoring since 2021.

“Vocational education is like a backbone in terms of the workforce of China,” Fischer said. “It serves society”.

Seth predicts a doubling of share prices of China Education Group and New Higher Education, and also likes China Yuhua Education’s convertible bonds.

While Chinese stock markets have bounced off their October lows after the reopening, the optimism has been deflated by an uneven economic recovery. Foreign investors have trimmed exposure to avoid economic and geopolitical risks.

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However, China’s reopening was a key theme at the first in-person Sohn conference since 2019, which invites funds in Asia to pitch their top investment ideas.

“We see it in secondary property auctions, in manufacturing, they’re slowly returning back to business,” Fischer told Reuters.

Richard Lawrence, who founded Overlook Investments Group in Hong Kong in 1991 and has more than US$6 billion under management, steered the investment audience to state-owned enterprise China Yangtze Power, a hydroelectric power facility operator that he called China’s “climate change blue chip”.

Lawrence hailed the company’s profit margins, long-term growth prospects, and capital management as reasons for betting on a company with a US$80 billion market cap. “There is nothing that comes close to it, in fact, globally,” he said.

Triata Capital, an emerging China-focused hedge fund launched in 2021 that returned 23 per cent last year, believes short video social platform Kuaishou Technology is undervalued.

Triata founder and CIO Sean Ho said he is not considering diversifying focus away from China and is keen on the artificial intelligence and restaurant sectors.

Eric Wong, founder of New York headquartered Stillpoint Investments, recommends LBX Pharmacy, previously a laggard among China’s top drug chains.

Companies set to be benefit from the booming electric vehicles (EV) demand were also a hot theme. Edward Lei of Astroll Management, a former partner at Tiger Global, recommended Guangdong-based BOE Varitronix, an automotive display leader, which is well placed to gain market share from Japan and Korea players.

Fei Sun, founder of Epimelis Capital suggested a spread trade between EV giant BYD’s China A-shares and Hong Kong-listed H-shares, an opportunity created by foreign investors unwinding BYD’s Hong Kong shares. REUTERS