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Stock Fund With 61% Return This Year Likes China, EV Stocks

A high-performing Matthews Asia fund manager says China is in a “sweet spot” for investors, thanks to rising individual wealth in the nation.

In some cities in China, residents have seen their incomes rise above $10,000 per capita, a global milestone for middle-class status, said San Francisco-based Michael Oh, manager for the Matthews Asia Innovators Fund. His fund has returned 61% this year and beat 90% of its peers.

“China has one of the the biggest consumer markets in the world,” Oh said. The increasing wealth of individuals will boost demand, which is why “innovative companies in China seem to me the most attractive right now,” he said. Strong human resources and capital markets in the country are also factors supporting the sector.

Favoring Chinese internet services and software firms, his fund allocated 65% of its assets to stocks in China and Hong Kong as of the end September, with stocks including Alibaba Group Holding, Tencent Holdings and video streaming service provider Bilibili Inc. among its top holdings.

Oh has also added Chinese electronic vehicle shares in recent months as the mainland government pledged to achieve carbon neutrality by 2026. Their relatively small size versus market leader Tesla Inc. indicates ample room to for them to grow in coming years.

Shares of Nio Inc., Workhorse Group Inc., Lordstown Motors Corp. and Electrameccanica Vehicles Corp. jumped sharply earlier this week following Tesla’s S&P entry. Their gains added to their rallies in recent months fueled by China’s renewed focus on building its battery-powered automobile industry.

Meanwhile, Oh said he has trimmed his holdings of high-end liquor stocks because of their high valuations.

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