Jia Tan (TJ): We believe that some Chinese companies that are producing large language models (LLMs) are likely to proceed rapidly to commercialization. However, LLMs facing challenges in usability and cost-effectiveness may present shorting opportunities. Following this year’s surge in AI-related stocks, signs of potentially inflated valuations are emerging. This may create attractive entry points in companies with genuine transformative potential, requiring careful stock selection.
We think that the property sector offers shorting opportunities in privately owned developers, which may not benefit from the support that their state-owned peers are now receiving from the authorities. More broadly, reforms at state-owned enterprises are allowing them to return more capital to investors – making them attractive long-book investments in China’s low-interest-rate environment in our view.
As the costs of raw materials rise, leading to margin squeezes in traditional Chinese medicine companies, our focus on the healthcare sector gains significance. China’s efforts to strengthen intellectual property rights, evident in increased Patent Cooperation Treaty (PCT) submissions, position it as an efficient and competitive market, which we see creating alpha opportunities through our relative value approach.
