Investors in Asia have been pouring money into private tutoring companies in China again, despite a two-year regulatory crackdown on after-school classes.
Regulatory filings show large hedge funds added Chinese education companies, such as New Oriental and TAL Education, to their portfolios in the first quarter of 2023.
They also bought stocks in US tech giants likely to benefit from ChatGPT and other artificial intelligence systems.
Hong Kong-based Greenwoods Asset Management bought 3.7 million of shares in New Oriental’s US-listed American depositary receipts (ADRs), making it the second largest in the fund’s US listed holdings. Greenwoods also built a new position in TAL Education by acquiring 2.2 million shares.
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TAL was also on Singapore-based FengHe’s shopping list. The fund run by ex-Alibaba CTO John Wu bought 2.1 million more shares to boost its stake in the tutoring giant. It took some profit from New Oriental during the quarter, although the latter remains its second largest exposure in the US market.
Share prices of both New Oriental and TAL collapsed over 90% from its peak after Beijing’s ban on K-12 private tutoring. The price of two stocks have doubled from the low point in October after China dropped its strict controls against Covid-19.
In China’s current market conditions, education companies stand out as spending on education does not decline as household spending declines, as parents invest in their children’s future, analysts say.
“The past quarter was the turning point for both New Oriental and TAL which offered very positive guidance for the next quarter and FY24,” Tina Li, an education analyst at BOCI research said in a note this week.
US-listed Chinese education firms, AI players
Other big investment firms including Tairen Capital, Dantai Capital, Keystone Investors and CloudAlpha Capital were also among the active buyers of US-listed Chinese education companies, according to an analysis based on the quarterly 13F filings to the US Securities and Exchange Commission.
The 13F filings reveal what investors owned in US listed stocks by March 31, giving some insight into the latest investment trends.
Another consensus buy during the first quarter was the big artificial intelligence (AI) players in the United States.
Trivest Advisors, which has assets under management of over $3 billion, purchased roughly 800,000 shares in Nvidia Corp, to build a new position in the world’s leading designer of computer chips used in creating AI.
The Hong Kong-based fund also significantly added Meta Platforms and Microsoft. Its top three US listed holdings by the end of March were all betting on AI, in order Meta, Microsoft and Nvidia.
Similarly, Greenwoods scooped up Nvidia, Microsoft, and Google parent Alphabet during the quarter. During an investor seminar in March, Jin Meiqiao, a portfolio manager at Greenwoods, said ChatGPT is a revolutionary product and thus the fund has made allocations to the related infrastructure field.
“Apparently fund managers are looking for the future investment themes and they have higher convictions in US AI areas in terms of technology advantage and scenarios of applications,” Linus Yip, chief strategist at First Shanghai Securities, said.
- Reuters with additional editing by Jim Pollard
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