Wild ride for top manager shows challenges in China stock bets

[SHANGHAI] For Joy Young, who runs one of the top-performing funds invested in Chinese stocks, 2021 hasn't been easy.

The founder of Shenzhen Infinite Fund Management saw this year's gains at her Infinite Native Gold No. 9 fund soar as much as 84 per cent in April. But by early the next month, those returns had halved before they worsened to 31 per cent as of June 18. That's due to her bets on a few stocks, including a starch-sugar producer that has performed poorly after reporting earnings in April.

The wild ride for her portfolio, which is still among the top 2 per cent of more than 15,000 stock-focused funds tracked by Shenzhen PaiPaiWang Investment & Management in the country, underscores how difficult 2021 has been for professional investors in mainland stocks.

Private funds in China on average returned 5.4 per cent as of end-May in 2021, versus a gain of 43 per cent for the whole of 2020, according to data from Ge Shang Wealth Advisory.

"For me, market conditions this year are the most challenging in the last three years," Ms Young said in an interview.

China's US$12 trillion stock market has been whipsawed in recent months by authorities' attempts to rein in speculation and a swift clampdown on the nation's biggest tech companies.

After a euphoric runup to a near record high in February, shares plunged into a correction in early March.

A slump in former heroes such as liquor giant Kweichow Moutai has hamstrung dozens of mutual funds that had piled into the same handful of stocks, prompting a flurry of redemptions.

Zhang Kun, one of last year's hottest Chinese stock fund managers, has turned into one of this year's worst, as his picks on the nation's technology and education plays soured amid regulatory crackdowns.

Ms Young's 100 million yuan (S$20.8 million) fund was set up in August 2020. When her portfolio saw a sharp, earnings-triggered correction in May, Ms Young added more shares in the country's consumer sector. More recently, she has shifted focus to cyclical sectors, betting on rising demand from a potential global infrastructure boom.

She said investors now have to select individual stocks from some high-growth sectors that are reasonably priced, rather than betting on a broad market rally that was a sure win in recent years.

One of Ms Young's biggest bets had been Zhejiang Huakang Pharmaceutical, a maker of sugar alcohol products.

Weaker-than-expected earnings sparked a tumble of more than 40 per cent in its shares since a peak reached weeks after its February listing, causing a retreat in Ms Young's portfolio. She has reduced the holding recently but remains optimistic on the stock's long-term outlook.

Currently, one of Ms Young's biggest wagers is Lomon Billions Group, which produces titanium dioxide pigment. She expects the company to benefit from increasing global demand for the product and to maintain a leading position in an industry disrupted by the pandemic.

She has also recently added cyclical stocks such as Zhejiang Huayou Cobalt, believing the economically sensitive cohort has a better chance to generate good returns in the coming months.

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