Hedge funds see value in Japan, Korea and China-listed stocks as global investors start to reassess the so-called exceptionalism of US stocks after Trump’s tariffs.
Stocks listed in Asian markets formed the majority of hedge funds’ top investment ideas at the annual Sohn conference held in Hong Kong on Friday.
UK-based activist hedge fund Palliser Capital revealed it has built a $100m position in Japanese-listed Tire manufacturer Toyo Tire.
The firm’s founder James Smith argued that the stock is being held back by its “excessively low performance indicators that create a misalignment between management and shareholders”.
Smith praised the quality of Toyo’s tire business, but urged the company to return more capital to shareholders and to buy out Mitsubishi’s 20% stake.
Japanese stocks have been subject to international investor attention as the reforms put forward by the Tokyo stock exchange have started to gain traction.
Companies have been taking measures to address low return on equity and price to book ratios, as well as enact corporate governance reforms.
Korean stocks will follow a similar path to Japanese stocks that have benefitted from ongoing corporate reform, according to Jon Jhun, a managing director at Hong Kong-based investment manager My.Alpha.
Jhun, who manages the firm’s Korea-focused fund, pitched Korean nuclear plant engineering, procurement and construction (EPC) stocks.
As countries look to nuclear options outside of Russia and China for their energy needs, Jhun estimated that Korean nuclear EPIC stocks like Hyundai E&C, Samsung C&T and DL E&C all could benefit from an annual profit pool of up to $5bn.
Despite growing tensions between China and the US, a number of hedge funds pitched Chinese stocks at the conference.
San Francisco-based fund Flight Deck Capital pitched Chinese search engine giant Baidu, due to the potential of its robo-taxi business.
The firm’s founder and managing partner Jay Kahn said Baidu’s Apollo Go “is the only robo-taxi player in China that’s not dependent on the capital markets to scale.”
He estimates that China’s robo-taxi industry will grow to around $237bn by 2034, and that Baidu can take a 15% market share. However, he argued this robo-taxi segment, alongside its cloud business, is given a zero valuation by the market.
Hong Kong and Shenzen-based hedge fund Triata capital also pitched a Chinese tech firm valued cheaply by the market: PDD Holdings.
Sean Ho, Triata capital’s founder and chief investment officer, described PDD as one of the fastest growing companies in the world, praising the firm’s founder and management team, as well as its lean company culture.
Despite this, he views the company as cheap: “PDD is trading at 9.7x price-to-earnings, around 36% of their market cap is in cash, so we think that’s only priced in at best their domestic market value, it hasn’t priced in any upside from Temu,” he said.
“With a lot of their consumer data domestically and globally, what they can do on the AI side, we think down the road there could be more things that will come out, and that really excites us.”
