As the Shanghai stock market has plummeted in recent weeks, Charlie Awdry, manager of the Henderson China Opportunities fund, has been ploughing more of his fund into US-listed stocks.
Onshore Chinese shares have slumped more than 40 per cent from their mid-June peak despite policymakers’ attempts to prop up the market, with Hong Kong stocks also suffering. The Hang Seng index is down 25 per cent over the same period.
China funds have posted similarly steep falls. The average fund in the sector lost 10 per cent in August, a period in which the Hang Seng dropped 10.6 per cent. Mr Awdry’s £518m fund lost 9.6 per cent in the same period.
Mr Awdry’s fund had 82 per cent in Hong Kong-listed stocks as of the end of July. The manager remains wary of the onshore market, and has opted instead to increase exposure to US-listed shares of Chinese companies.
American depositary receipts (ADRs) providing access to these companies made up 11 per cent of the Henderson China Opportunities portfolio at the end of July, but this figure has since increased.
Mr Awdry said: “ADR shares are quite cheap and the likes of Alibaba are cheap, so we’ve been buying quite a lot of these.”
Alibaba’s US shares fell 16 per cent last month, pushing the stock to $66.12, below its IPO price of $68.
The manager is also sceptical of China’s growth prospects. He said: “There is no way the country will achieve its targeted 7 per cent GDP growth.”
Related to that assessment are Mr Awdry’s fears that Chinese financials have “asset quality issues which are getting worse”, a concern which has prompted him to sell out of all his holdings in the sector.
Instead, he is focusing on buying private businesses and is particularly confident about the healthcare sector, which is a 4.6 overweight in his fund.
