China’s star fund manager dumps long-held consumer bets in pivot to AI trade

China’s tepid consumer spending prompted one of the country’s biggest fund managers to aggressively cut holdings in consumption-related stocks from liquor distillers to e-commerce platforms while rotating into artificial intelligence-linked names, abandoning years-long bets to align with the evolving dynamics of the stock market.

Zhang Kun, the fund manager of 20.8 billion yuan (US$3.1 billion) E Fund Blue Chip Selected Mixed Fund, reduced positions in Kweichow Moutai, Wuliangye Yibin and Luzhou Laojiao – China’s biggest baijiu distillers – by at least 47 per cent in the second quarter, according to a comparison of quarterly portfolio reports. He also trimmed Alibaba Group Holding by 75 per cent in the period, the data showed.

In a pivot to the AI trade, the money manager bought shares in chipmaker Semiconductor Manufacturing International Corp (SMIC) and Suzhou Dongshan Precision Manufacturing, a maker of optical modules used in AI data centres, according to the fund’s second-quarter portfolio report, released this week. The two stocks made their way into Zhang’s top 10 holdings.

The rebalancing represents a buckling by Zhang, a stalwart who maintained consumer stocks as his key holdings for years, often touting the sector’s resilience even as consumption cratered amid a worsening job market and falling property prices. The latest economic data showed that retail sales remained sluggish, with sales of high-end baijiu plunging on falling demand and online shopping stalling because of reduced subsidies from e-commerce platforms. Zhang had doubled down on his baijiu positions in the first quarter.