XU XIAOYONG has returned 54 percent for investors during his fund’s first year by hunting for stocks that can thrive. That means buying liquor firms supported by resilient consumers or betting that domestic tech suppliers will see more demand from larger companies as a result of the Sino-U.S. trade dispute, encouraging innovation, said Xu, investment director of Changan Fund Management Co.

Xu started his Changan Yulong Flexible Allocation Mixed Fund in September last year, a few months before China’s equity market began recovering from a sell-off. While it’s still in its early days, it is beating 99 percent of more than 2,500 peers tracked by Bloomberg.

Xu’s top-10 holdings at end-June included liquor makers Kweichow Moutai Co. and Wuliangye Yibin Co. as well as telecom equipment manufacturer ZTE Corp. and WUS Printed Circuit (Kunshan) Co., according to the fund’s quarterly report. Those four companies have jumped more than 75 percent this year.

“We’ve seen some sizable gains in these stocks this year, but there remains huge room for them to grow their business over a three-to-five-year horizon,” said Xu. “These stocks are worth holding on to.”

Xu said he has added electronics shares this quarter, and is poised to boost exposure to consumer and tech sectors in the event of a correction. While consumer shares will benefit from growing household expenditure, the trade dispute will prompt tech giants like Huawei Technologies Co. to seek suppliers at home, he said.

Still, Xu said he is committed to investing in China’s equities. “I see plenty of investment opportunities in this market,” he said. “As a fund manager I focus more on stock picking and delivering absolute gains through a group of handpicked shares than paying attention to macro factors.”

(SD-Agencies)