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Opto Sessions Hamilton’s Je recommends China tech and green energy sectors

Before launching his fund, William Je was the chairman of equity capital markets for Macquarie Banking Group, a global heavyweight managing more than $520bn in assets. In that role, Je managed the firm’s Greater China capital market interests and principal investment activities.

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A day in that role involved two key parts. First, researching companies that could need banking services and making pitches to get mandates. Second, analysing and organising industry experts — including professionals, lawyers, accountants and valuers — to achieve client objectives. Lastly came scoping for the process to deal with the stock exchange or relevant regulators.

By the end of the stint, Je had gained a unique perspective into investment in China. For “all investments in China, we have to consider the political environment as well,” he said. This year is a politically sensitive one for the country, and therefore more policy uncertainty is to be expected, he added.

According to Je, in general “China really wants to liberalise right”, but the big constraint is political. “It's actually quite difficult for them to be independently liberalised, because you have to follow the whole politics.”

At Hamilton, Je follows a long-term investment policy, which is focused on “value and long-term growth of the companies.” “We just want to ignore the short-term, daily movement of the stocks price,” he added.

The big selloff in China’s tech companies in 2021, which saw Alibaba [BABA] and Tencent [HK:700] halve their share prices, presents an investment opportunity in Je’s view.

 “Given the valuation is attractive right now, I think it's actually good to consider to invest,” he said. While investment would need to be selective given the regulatory policy environment, Je forecasts that China markets can expect stability, at least for 2022.

While the real economy is doing poorly, China’s central bank is releasing liquidity and cutting interest rates contrary to global moves. Je expects a further easing of the country’s cash reserves to increase stability. “They don't want the economy to deteriorate further before the 20th Congress. I think this is the one of the key considerations that you know the market will be stabilised,” he said.

“They don't want the economy to deteriorate further before the 20th Congress. I think this is the one of the key considerations that you know the market will be stabilised” - William Je

 

However, Je thinks earnings are likely to come in on the lower side because Chinese tech companies are not isolated from the global state of a weaker economy. It is likely to be worsened by China’s zero Covid strategy, which will further delay normalcy of business activity.

The sizeable opportunity in China comes in the green energy sector, owing to the country’s target to be carbon neutral by 2060, Je said.

Given China’s size, the segment “still has a lot of potential”, Je said. He added that “China, when the government wants to do something, they can direct all the resources to a particular sector. I think they are doing that right now.”

That said, Je warns that some companies are already trading too high compared with their earnings potential in anticipation of the state-sponsored boom. He believes that “some of the companies are overvalued. And at the end of day investment is about the value”. As a result, selecting the right company is critical.

At Hamilton, a key area of interest for Je is new investment modes like cryptocurrencies and NFTs. Again, this stems from his experience in China. “Chinese are the biggest investors for cryptocurrencies in the world, but a lot of them, they’re hidden,” Je said.

The Chinese government has banned such instruments in anticipation of launching a centralised digital currency governed by the state, but Je expects that sooner or later the country may revisit this stance.

To hear more insights from William Je, listen to the full episode on Opto Sessions.

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