Little Love for China as Top Hedge Funds Favor Japan, India

(Bloomberg) -- Anyone looking for evidence that the China-U.S. trade war has chilled investors on Asia’s largest economy need go no further than the picks from some of the world’s top hedge fund managers at this year’s Hong Kong Sohn Conference.

Just two picked a China stock, and one was to short it. Blue Orca Capital’s Soren Aandahl questioned Anta Sports Products Ltd.’s accounting and corporate governance, saying its Hong Kong-listed stock may fall as much as 34%. His blistering attack sent Anta down as much as 13% within minutes. It rebounded on Friday, up as much as 6%.

Even China specialist Tongshu Wang, the founder of long-short fund WT Asset Management, noticed the lack of China selections.

“Today it seems like the China topic is not that hot, and it’s a real challenge,’’ said Wang, who was the second-to-last presenter.

Wang did however stand by the opportunities coming out of his country, saying China will be “the best alpha market in the world for the next five to 10 years.” He settled on Pinduoduo Inc. for his pick, because of its growth potential as e-commerce takes off.

For a minute-by-minute recap of the 2019 Sohn conference, click here

Instead, the conference was dominated by bullish calls on Japanese oil refiners and Indian banks, and some other savage short bets, including one on Casio Computer Co., which Interlink Asia Pacific Fund Chief Investment Officer Sean Debow said was fading into insignificance as consumers shift to smartwatches.

Here’s a selection of other notable calls:

No Wrinkles

Renowned short-seller Gabriel Grego from Quintessential Capital Management had a surprise in store with his long call on Botox maker Allergan Plc. Botox has become a brand-name product like Kleenex, he said, yet Allergan’s shares are at least 50% undervalued on both an absolute basis and compared to peers. Grego said there’s a lot of upside to be had, if only the company’s management would quit.

Read more: Hedge fund goes from pot to Botox calling for Allergan change

Watch Out Casio

Interlink’s Debow launched a stinging attack on Casio, saying the watchmaker is out of time with changing fashions. “If you just have a plain old watch, it’s not going to cut it,” he said. The Japanese company has missed the move to smartwatches and doesn’t have a strong presence on social media where younger consumers shop these days. Casio “haven’t changed for a long time. And I don’t think they can change.” Shareholders sent the stock down on Friday 2.4%, bringing losses for the year to 7.1%.

Read more: Casio is Interlink’s short bet at smartwatches take over

Ice Ice Baby

Oasis Management Co.’s Seth Fischer closed the conference by unveiling a new activist campaign in Japan targeting a scandal-hit commercial refrigeration-equipment maker. Hoshizaki Corp. has a “great business” despite its recent difficulties, and its stock is worth at least 52% more, he said. The 2020 Summer Olympics are a growth driver for Hoshizaki because people in the stands will want food and beer, naturally. Investors piled in Friday, sending Hoshizaki up 3.3% to the highest since January.

Bank on India

Tybourne Capital Management’s Eashwar Krishnan and Flowering Tree Investment’s Rajesh Sachdeva both touted bullish bets on Indian banks, as a growing middle class use more financial services. Krishnan has high hopes for Axis Bank Ltd., backing new CEO Amitabh Chaudhry to lead a transformation from “a reckless, corporate-focused lender to a meticulous, process-driven retail and SME-focused institution.”

Sachdeva picked IndusInd Bank Ltd., saying its pending merger with a microfinance company will drive up return on assets.

Read more: India’s Axis Bank is Krishnan’s top pick at Sohn conference

The Good Oil

Japan’s two major oil refiners got some loving from York Capital Management’s Masahiko Yamaguchi and Asia Research & Capital Management’s Alp Ercil. A series of mergers has seen the two companies snare about 80% of the market, in what Yamaguchi called “basically a government-sanctioned duopoly.” He plumped for JXTG Holdings Inc., saying the shares may gain at least 70%. Ercil picked the other half of the duopoly, Idemitsu Kosan Co., saying the shares may surge more than 50% in the coming year, and lauding the company’s planned dividend and buybacks as among the most generous in Japan.

Read more: Idemitsu surging 50% is Ercil’s top pick at Sohn conference

Read more: Japan’s JXTG on road to success after consolidation, York says

Roger That

Yunqi Capital’s Chris Wang picked a company that’s been squarely impacted by the trade war. Unfairly, he says. Rogers Corp. makes specialty materials for the telecoms and automobile sectors. Its shares can “easily double” in three years on rising demand from the construction of 5G mobile phone networks and technological advances in cars. The Trump administration’s attack on Chinese tech companies isn’t too much of a problem for Rogers: Huawei Technologies Co. and ZTE Corp. each account for less than 10% of its sales.

To contact the reporters on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net;David Ramli in Singapore at dramli1@bloomberg.net;Tom Redmond in Singapore at tredmond3@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, Peter Vercoe

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