By Summer Zhen
HONG KONG Large Asian hedge funds added Chinese education companies to their portfolios in the first quarter of 2023, and bought stocks in U.S. tech giants expected to benefit from ChatGPT and other artificial intelligence systems, regulatory filings showed.
Investors poured money into private tutoring leaders, including New Oriental and TAL Education, that have come through a near two-year crackdown in China on after-school education.
Hong Kong-based Greenwoods Asset Management bought 3.7 million of shares in New Oriental's U.S. listed American depositary receipts (ADRs), making it the second largest in the fund's U.S. listed holdings. Greenwoods also built a new position in TAL Education by acquiring 2.2 million shares.
TAL was also on Singapore-based FengHe’s shopping list. The fund run by ex-Alibaba CTO John Wu bought a further 2.1 million shares of the tutoring giant to build an existing position. It took some profit from New Oriental during the quarter, although the latter remains its second largest exposure in the U.S. market.
Share prices of both New Oriental and TAL collapsed over 90% from its peak after Beijing’s ban on K-12 private tutoring. The price of two stocks have doubled from the low point in October after China dropped its strict controls against COVID-19.
In China's current market conditions, education companies stand out as spending on education does not decline as household spending declines, as parents invested in their children's future, analysts say.
“The past quarter was the turning point for both New Oriental and TAL which offered very positive guidance for the next quarter and FY24,” Tina Li, an education analyst at BOCI research said in a note this week.
Other big investment firms including Tairen Capital, Dantai Capital, Keystone Investors and CloudAlpha Capital were also among the active buyers of U.S.-listed Chinese education companies, according to an analysis by Reuters based on the quarterly 13F filings to the U.S. Securities and Exchange Commission.
The 13F filings reveal what investors owned in U.S. listed stocks by March 31, giving some insight into the latest investment trends.
Another consensus buy during the first quarter was the big artificial intelligence (AI) players in the United States.
Trivest Advisors, which has assets under management of over $3 billion, purchased roughly 800,000 shares in Nvidia Corp, to build a new position in the world's leading designer of computer chips used in creating AI. The Hong Kong-based fund also significantly added Meta Platforms Inc and Microsoft Corp. Its top three U.S. listed holdings by the end of the March-end were all betting on AI, in order Meta, Microsoft and Nvidia.
Similarly, Greenwoods scooped up Nvidia, Microsoft, and Google parent Alphabet Inc during the quarter. During an investor seminar in March, Jin Meiqiao, a portfolio manager at Greenwoods, said ChatGPT is a revolutionary product and thus the fund has made allocations to the related infrastructure field.
“Apparently fund managers are looking for the future investment themes and they have higher convictions in U.S. AI areas in terms of technology advantage and scenarios of applications,” said Linus Yip, chief strategist at First Shanghai Securities.
(Reporting by Summer Zhen; Editing by Simon Cameron-Moore)