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Fund manager names three Chinese drinks companies as top picks

31 March 2023 By Sarah Neish

Zhang Kun, China’s biggest asset manager, has named Kweichow Moutai, and liquor distillers Wuliangye Yibin and Jiangsu Yanghe Brewery among his Top 10 holdings.

According to the annual report issued by Zhang Kun, the biggest fund manager in China, several drinks companies are topping the charts when it comes to fruitful investments.

Kun’s US$8.3 billion E Fund Blue Chip fund released its annual report on 31 March, which painted an enormously positive picture for Asian drinks firms.

The largest holding in the fund at the end of 2022 was Tencent Holdings, a Chinese multinational technology and entertainment company headquartered in Shenzhen at 9.9 per cent.

However, hot on its heels were distillers Wuliangye Yibin and Jiangsu Yanghe Brewery, which came second and third, respectively, the report showed.

Wuliangye Yibin, based in South West China, specialises in producing baijiu. According to the firm, it owns China’s oldest existing “crypt-type” fermentation pits group, passed down from the Ming Dynasty (1368-1644 A.D.).

Jiangsu Yanghe Brewery, headquartered in Suqian, China, makes both spirits and red wine. Among its portfolio are the Yanghe, Shuanggou, and Sujiu baijiu brands.

When choosing his stocks, Kun said he looks at a company’s per-share earnings and free cash flow growth, as well as its “moat”, which refers to the competitive edge it has over rivals.

Within the report, Kun attributed his latest investment choices to the increased focus from the Chinese government on boosting consumer purchasing.

Kun’s continued confidence in drinks giant Kweichow Moutai was evidenced by him adding 210,000 of Kweichow shares to his portfolio in the fourth quarter of 2022.

He also used the report as opportunity to caution against making hasty decisions to sell in response to a challenging economic climate.

“The stock market suffered from bouts of swings and declines in 2022,” Zhang said in the annual report. “For each significant market decline, stocks are up for ‘discount sales’. It’s not a good option to refrain from buying into a company with long-term profitability, or even sell it, simply because of worries about the change of the economic situation in the short term or hedges against market fluctuations.”

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