Two of the world’s biggest state owned investors have poured money into China’s consumption stocks during the third quarter, raising their bets on transformation of the world’s second largest economy at a time when Western investors are retreating over growth concerns and amid an intensifying property crisis.
Saudi Arabia’s Public Investment Fund (PIF) boosted its stake in PDD Holdings by 45 per cent to 1.7 million shares in one the biggest adjustment to its US$36.5 billion equity portfolio last quarter, its latest 13F filing with the Securities and Exchange Commission showed.
Meanwhile, Singapore’s Temasek Holdings bumped up its holdings in JD.com by 11 per cent to 3.9 million share and increased its long position in KraneShares CSI China internet ETF by 45 per cent. The ETF gives exposure to companies benefiting from increasing domestic consumption by China’s growing middle class. It left its positions unchanged in six other Chinese companies including Alibaba and Yum China Holdings, according to its 13F filing.
“Consumption is a solid China story compared with other sectors,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank. The recovery has remained steadfast this year and the outlook for consumer-focused companies is still promising, he added.
Chinese sovereign wealth fund buys ETFs to shore up flagging stock market
Chinese sovereign wealth fund buys ETFs to shore up flagging stock market
The Saudi and Singaporean sovereign funds have timed their bets to coincide with market dips and low valuations. The MSCI China has dropped 3 per cent last quarter, logging the weakest performance among major global indices, while index constituents’ forward 12-month earnings of 11.7 times is at the lowest since 2018, according to Bloomberg data.
Analysts have also turned more optimistic about major e-commerce platform operators. Alibaba’s positive growth was partly due to its successful investments in small and medium-sized merchants, while JD’s leadership in home appliances grew, Charlene Liu, head of internet and gaming research at HSBC said in a note on Tuesday.
Bloomberg’s consensus 12-month targets for Alibaba and JD.com’s US-listed shares stand at US$137.02 and US$45.11, respectively, representing a 63 to 69 per cent upside from the current levels.
Consumption patterns in China are set to benefit Pinduoduo, according to John Choi, analyst at Daiwa Capital Markets in Hong Kong. “As consumers become more rational and price-sensitive compared to last year, we expect PDD to further gain market share over 2023 to 2025,” he wrote in a note to clients last week.