Antipodes is focusing its Chinese exposure on e-commerce firms which it says present less regulatory risk than other parts of the market.
On an investor webinar, Antipodes Global fund manager, Jacob Mitchell, said he favoured e-commerce as its penetration would continue to grow in the future. His fund had 14% allocated to China including Tencent and Trip.com Group (C-Trip) in its top 10 largest holdings.
“The largest cluster of companies we have in China are those with e-commerce exposures including Tencent, JD.com and C-Trip where, for the multiples you’re paying, you’re getting structural growth,” he said.
“There will be an element on economic sensitivity but it is far less sensitive than a lot of the Chinese equity market which is dominated by domestic cyclicals.”
He said Chinese companies were in a similar position as Facebook in the US in having come out the other side of regulatory scrutiny. Numerous fund managers had been reducing their China allocations over the last few months in light of this increased regulation.
“There has been regulatory tightening but we’re fairly well progressed through that so the uncertainty will fall. For companies that have been directly by that, investors will go back to focusing on the long-term opportunity and we think those companies are supported by the valuations being cheap relative to the long-term growth opportunity,” Mitchell said.
“For Tencent, they have exposure to a growing share of internet advertising, a dominant gaming platform and advertising penetration in China will continue to grow and outperform gross domestic product.”
The Antipodes Global fund had returned 21% over one year to 31 August, 2021, according to FE Analytics, versus returns of 14.6% by the absolute return sector within the Australian Core Strategies universe.
