Citywire AA-rated Jian Shi Cortesi has doubled weightings to Chinese clean energy and healthcare companies in order to capture the growth potential of the two sectors.
This fund was unveiled in January as a means of targeting the most innovative areas of China's 'new economy' as opposed to the old, manufacturing-driven sectors.
Cortesi has upped her exposure to clean energy and healthcare stocks respectively from 6% to 12% and from 4% to 10% over the past three months.
‘Income growth in China has pushed people towards private health care and medical insurance. The central government provides a basic coverage which doesn’t match anymore people’s needs,’ she said.
On the clean energy side, the manager thinks the government is beginning to respond to the huge demand of change coming from citizens for better air quality.
‘Everyone is aware of the intolerable level of pollution in the country. The government is spending $90 billion per year in green energy. This unveils a range of interesting opportunities,’ she added.
The manager has a 3.74% position in Huadian Power, which gives the fund a direct exposure to the clean energy company Huadian Fuxin.
Speaking about healthcare, she has a 2.5% holding in Fosun Pharma, which is targeting a big demand from wealthy expats for private hospitals and working also on the medical services side.
New frontiers: tech and consumers
The underlying idea of the fund managed by Cortesi is that the best opportunities in China will not arise from the old economic model based on investment and infrastructures, but from new areas which will benefit from a consumption-led economy, such as healthcare, clean energy, tech and consumers.
The manager likes growth companies in the technology sector, as they offer the best returns and the most reliable business models. ‘The tech sector is vibrant in China, with more than 200 public listed companies. The Internet sector is particularly intriguing,’ she said.
The biggest position of the fund is in Tencent (8.53%), as Cortesi thinks the company has created a real ecosystem and it’s very creative in monetising its ideas. On the contrary, the manager favours cheap stocks on the consumers’ side and has a 2.9% position in the electric appliances company Gome.
‘It’s a great turnaround story. The company has performed poorly but is developing its on-line shopping and shutting down some bad units,’ she said.
Banks and bubble
Elsewhere in the fund, Cortesi owns half of the benchmark weighting in banks as she thinks they are not safe. However, she views valuations as very low and believes the stocks might rebound significantly.
The manager holds no real estate companies and believes that the sector is a very risky. ‘I see a bubble in the property area. There is a strong oversupply, especially in smaller cities, and stock prices are too high,’ she said.
Cortesi, who runs a fairly concentrated portfolio of 42 stocks, returned 6.74% over the past three years. This is 5.69 percentage points more than the average manager in the Equity – Emerging Markets Inc. Asia sector.