HK wealth fund CEO eyes new productive forces in China
The first chief executive officer of the new Hong Kong Investment Corporation (HKIC), Clara Chan, sees a lot of interesting investment opportunities in China — especially sectors that are defined by Beijing as “new productive forces”.
These include biomedical, automobile manufacturing, and power battery sectors.
“I do see many of the people that we are talking to, not only in Hong Kong, but also internationally, like from the Middle East, from Southeast Asia, they are very focused on China in biomedical, automobile manufacturing, power batteries, and also chemical engineering,” Chan said during the recent Milken Institute Global Investors’ Symposium in Hong Kong.
“I think all of these are very interesting sectors,” she said.
This is Chan’s first public speech after taking the helm of the HK$62 billion ($7.9 billion) government-owned fund in October 2023.
The private market investment veteran stressed that as a long-term investor, the HKIC won’t look at the Chinese market from a broad-brush perspective and jump to the conclusion that a certain sector or area is un-investable.
Rather, she said she will try to identify whether a headwind is cyclical, or structural and long-term.
She referred to the current interest rate difference between China and the US and some other developed markets — which partly contributed to the capital outflows from China — as a cyclical factor, while in the long-term, the growth story seemed intact.
Part of the story are the “new productive forces”, China’s new catchphrase, which was first used by Chinese President Xi Jinping last September to refer to the country's transformation to a new economic model driven by innovation and technology.
“These are the things that we definitely would be paying a lot of attention to and continue to follow up on,” Chan said.
“Innovation and technology would definitely be the growth driver. But in terms of the GDP growth and overall economic growth, let's not look at each of these segments as a broad-brush sector.”
Each technology consists of different subsegments that may present better value in the long term. “We need to pick and choose as investors,” she said.
Asset owners whom AsianInvestor talked to lately shared the view that investing in China going forward will require stronger sector and securities selection skills.
HSBC Life Hong Kong, for example, is shifting to an active equity investment mandate to invest in China for selective opportunities in different sectors.
EXECUTION MATTERS
As the central government set the annual growth target at around 5% for 2024, Chan said that HKIC will be watching closely on the actual execution of national policies.
“What is the path leading there? What is the timing? And also what is the institutional mechanism that is going to guide us through? So, this is the thing that we at HKIC, and also the world, are looking at very closely,” she said.
Noting that there has been a lot of pessimism in the international media on the outlook of China, Chan said she will try to focus on the facts and data while staying away from the noise, which may cause misjudgement.
“I think the growth and recovery trajectory will also be bumpy,” she said, believing the growth momentum might differ across different sectors.
Promising developments she highlighted included American biotech company Moderna announcing in November last year the construction of its first pharmaceutical plant in Shanghai, with an estimated investment of Rmb3.6 billion ($498 million); Siemens’s additional Rmb1 billion ($138 million) investment to establish a medical equpment research, development and production centre in Shenzhen; and Volkswagen Group ramping up investments in electronic vehicle manufacturing in Anhui, China.
CLEAR GOALS
HKIC was founded in late 2022 to make private investments to promote the city’s development in industries that the government identifies as strategically important, including life and health technology, AI, data science, fintech, advanced manufacturing, and new energy technology.
Initial assets allocated to the corporation totalled HK$62 billion, consisting of the HK$22 billion Hong Kong growth portfolio; the HK$5 billion Greater Bay Area investment fund; the HK$5 billion strategic tech fund; and the HK$30 billion co-investment fund.
The fund is set to implement its first batch of direct investment and co‑investment projects in the first half of 2024, Hong Kong’s Financial Secretary Paul Chan Mo-po announced in the city's annual budget on February 28.
“We don’t see ourselves as a pureplay capital provider,” Chan said, noting that the money comes and goes in the markets as momentum changes.
“We see ourselves as a builder and supporter of the relevant ecosystem in Hong Kong,” she said, stressing that HKIC will focus on the Hong Kong venture capital industry and strategic sectors such as climate tech, advanced manufacturing, and biotech, where Hong Kong has an advantage.