Chinese fund managers’ pursuit of AI plays backfires as hot tech stocks wobble
A shift to technology stocks by China’s most seasoned fund managers has backfired, with the unwinding of AI plays taking a toll on the performances of their products. Funds run by some star managers with a value-investing approach all recorded declines in net asset values last month after they switched to chipmakers and the manufacturers of optical transceivers and out of long-held consumer bets…
China’s top fund managers who shifted their focus to technology stocks, driven by the AI frenzy, have seen their investments suffer as tech stocks have plummeted. Funds run by seasoned managers who previously favored value investments all experienced declines in net asset value after moving towards chipmakers, optical transceiver manufacturers and abandoning long-held consumer stocks in Q2.
Technology stocks listed in mainland China suffered their biggest monthly drop in July, mirroring a global sell-off of AI-related assets due to concerns about their investment returns in cloud infrastructure. This approach, motivated by fear of missing out on AI, likely led to buying at the peak of the tech boom. The consumer stocks they discarded rebounded as they loaded up on tech stocks at higher prices.
Liu Yanchun's fund at Great Wall Invesco Fund Management declined by 28% last month following purchases of optical transceiver maker Zhongji Innolight, Konfoong Materials International and other tech stocks, while cutting exposure to consumer and pharmaceutical stocks. Zhang Kun, at E Fund Management, saw his flagship fund drop 1.2% in July after transitioning to AI in Q2.
The fund's top 10 holdings included chipmaker Semiconductor Manufacturing International Corp and Suzhou Dongshan Precision Manufacturing, an optical modules maker for AI data centers. Meanwhile, they reduced liquor producer stakes by at least 47%. Shanghai's tech-heavy Star Market 50 Index fell by 26% in July, its worst monthly performance since its launch in July 2020, and the ChiNext gauge fell by 23%, the second worst decline on record.
Both had surged by at least 40% this year before the decline. Conversely, consumer stocks in Shanghai's CSI 300 Index rose by 12% last month, and pharmaceutical shares rebounded by 7.9%.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
