UBS China Fund plunges
UBS’s $10bn China Opportunity Fund has taken a hit following the country’s recent crackdown on the technology sector.
China's regulatory crackdown on some of its largest companies has wiped hundreds of billions of dollars off their market value. From technology to education to property, it seems no sector is safe. Take a look at the companies affected so far https://t.co/FuGxLtSVST pic.twitter.com/8WWqRZtUOq— Reuters (@Reuters) September 16, 2021
Bin Shi, who heads up China equities at UBS, has previously been positive on the prospect of Chinese equities, even suggesting at a fireside chat last month that the worst was over in terms of penalties on Chinese tech companies.
So much was Shi’s confidence that the fund acquired a number of high-quality A-share titles listed in Shanghai and Shenzhen.
Shi has an esteemed reputation within his sector, which is why investors heed his advice, and why he oversees four different vehicles focusing on Chinese equities, the biggest being UBS’s China Opportunity Fund.
The China Opportunity Fund is a standout fund at UBS, with $14.4bn worth assets under management at the end of 2020. Over the past five years it has returned over 12% on an annualised basis.
Shi himself is highly rated in the industry, while the fund has previously been given five-star rankings.
Congratulations to Bin Shi of @UBS Asset Management for winning the Citywire US Offshore Award for the best risk-adjusted performance over three years in the Equity-China category.— Citywire Americas (@CWAmericas) February 18, 2021
Check out the list of all the winners and runners-up here: https://t.co/uCHRITBzxJ pic.twitter.com/b9j27AnMkX
However, things can change quickly, and they have.
Me: Don’t say it.— Ramp Capital (@RampCapitalLLC) February 23, 2021
Brain: Risk happens fast. pic.twitter.com/Q7JS5bbpBm
A-shares are nosediving, as are Chinese securities listed abroad.
Locals haven't given up on the Chinese Equities.— Richard Dias (@RichardDias_CFA) September 14, 2021
(A-shares are companies based in mainland China listed on the Shanghai or Shenzhen exchanges, & generally only available for trading to mainland Chinese citizens. H-shares are listed in HK & open for trading to all investors.) pic.twitter.com/3e3vLdLJVJ
The fund is down by more than 20% overall in 2021, while Morning Start took a star away in July.
It is behind its benchmark the MSCI China Index, as well as a number of its competitor funds.
MSCI China Index year-to-date. pic.twitter.com/GbCaJRsIkp— Daniel Lacalle (@dlacalle_IA) August 20, 2021
Shi, it seems, came unstuck betting big on companies specifically impacted by the crackdown by the CCP.
The fund is overweight in financials compared to its peers, with Tencent making up close to 10% of its portfolio. Alibaba and Ant, which is being broken up by the government, comprise 5.74%.
#Alipay break-up, a power grab by Chinese Communist Party— WION (@WIONews) September 18, 2021
'Game over' for young video gamers in #China.#Macau casino curbs topple gambling stocks.
What's Xi Jinping's next target?
Watch China: Censorship. Crackdown. Chaos on #WIONWideanglehttps://t.co/BH54zOAbAW
Another sector the Chinese government is going after is insurance, and the fund took a hit there too, with 5.29% of its portfolio allocated to Ping An, one of the country’s largest insurers.
China Missing in Global Top 10 As Regulatory Crackdown Continues - https://t.co/bfbpYjLteb pic.twitter.com/0GVFaooMpL— African Inst of Tech (@goafrit) September 16, 2021
The question now is does UBS stay all in on its China bet, having been one of the earliest in the door.
*CHINA DEFENDS TECH CRACKDOWN IN MEETING WITH WALL STREET CHIEFS— Fred Yin (@fredyin) September 18, 2021
Xi Jinping is clearly reluctant to relinquish power, and the impact of his leadership on Chinese equities over the long-term remains to be seen.
As if the existing tech crackdown wasn’t sufficient, China’s embattled developer Evergrande is on the brink of looming default.
‘China’s Lehman Brothers moment’: Evergrande crisis rattles economy https://t.co/vz8dNWOXwt— The Guardian (@guardian) September 17, 2021
*EVERGRANDE SAYS SIX EXECUTIVES REDEEMED INVESTMENT PRODUCTS IN ADVANCE— Investing.com (@Investingcom) September 18, 2021