Zhang Kun, China’s biggest money manager, sticks to bets on giants like Tencent and Kweichow Moutai, looks past lack of dividends so far

Valuations of ‘lots of high-quality companies’ already very attractive over the long term, Zhang says in quarterly report

Zhang’s flagship fund lost 10.9 per cent of its value in the second quarter

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The Tencent headquarters in Shenzhen. The firm’s stock slumped by 14 per cent in the second quarter. Photo: Bloomberg

Published: 3:00pm, 20 Jul 2023Updated: 6:36pm, 20 Jul 2023

Zhang Kun, China’s biggest fund manager, has latched onto the country’s biggest companies – from Tencent Holdings to Kweichow Moutai – and is betting that their moating advantage will deliver sustainable returns over time, as the economy recovers, despite a dismal second-quarter showing.

The social-media and gaming company and the distiller were the two biggest holdings of E Fund Blue Chip Selected Mixed Fund, Zhang’s 49.2 billion yuan (US$6.9 billion) flagship fund, over the second quarter, according to a quarterly portfolio report published on the E Fund Management website on Thursday. Tencent and Kweichow Moutai each accounted for 9.9 per cent of the fund’s total assets, the maximum allowed for a stock in a single fund’s portfolio. Their holdings were unchanged from the first quarter.

The strategy of holding the most valuable companies has, however, not yet paid off for Zhang, with his flagship fund losing 10.9 per cent of its value in the second quarter. The CSI 300 Index of China’s biggest onshore stocks fell 5.2 per cent in the same time span, while Hong Kong’s Hang Seng Index dropped 7.3 per cent. Tencent and Kweichow Moutai slumped by 14 per cent and 7.1 per cent, respectively.

“Over the long term, the valuations of lots of high-quality companies are already very attractive,” Zhang said in the report. “It will be a good deal even if some industry captains consider taking them private.

‘The difficulty and pessimism we have encountered now may only be a blip on the forward path,’ Zhang says. Photo: Handout

“In any market and time, high-quality companies are always scarce. So we’ll stick to our current investment frameworks and continue to improve our research ability.”

Zhang Kun, China’s biggest money manager, sticks to bets on giants like Tencent and Kweichow Moutai, looks past lack of dividends so far

Valuations of ‘lots of high-quality companies’ already very attractive over the long term, Zhang says in quarterly report Zhang’s flagship fund lost 10.9 per cent of its value in the second quarter

Valuations of ‘lots of high-quality companies’ already very attractive over the long term, Zhang says in quarterly report

Zhang’s flagship fund lost 10.9 per cent of its value in the second quarter