On February 15, HHLR, an independent fund management platform under Hillhouse Capital that specializes in secondary market investments, revealed its U.S. equity holdings as of the end of the fourth quarter of 2024. This announcement underscored HHLR's sustained commitment to Chinese stocks, or China concept stocksIn the second quarter of the previous year, the value of holdings in Chinese companies accounted for a staggering 85% of HHLR's portfolioThis figure climbed to 93% by the third quarter, and of HHLR’s top ten holdings in the fourth quarter, eight were Chinese stocksThe top two investments remained in pharmaceutical giant BeiGene and e-commerce behemoth Alibaba, alongside Pinduoduo, NetEase, Beike, Vipshop, Legend Biotech, and Futu Holdings.

This portfolio composition reflects HHLR Advisors' ongoing focus on Chinese assetsAccording to U.SSecurities and Exchange Commission (SEC) regulations, fund managers overseeing more than $100 million in assets must file a document called a “13F form” 45 days after each quarter, disclosing their stock and bond holdingsThis filing serves as a barometer of market sentimentNotably, in the fourth quarter, of the four newly purchased stocks, two were Chinese companies: Agora and Zhihu Group (Momo).

Additionally, among the ten stocks that HHLR increased in their holdings during the fourth quarter, four were Chinese: JD.com, Beike, Futu Holdings, and Dada GroupAgora has seen a return exceeding 200% since the end of September 2024, while Futu Holdings is also one of HHLR's core holdings, with its stock rising over 100% since the fourth quarter of 2024. Alongside its significant investment in Chinese stocks, HHLR also ventured into a new acquisition in the fourth quarter, purchasing shares in WNS, a business process management company based in Mumbai, India, which quickly ascended into the top ten of its portfolioSince mid-January, WNS's stock has seen an increase of over 30%.

A review of HHLR’s investment trajectory over the past year reveals an evolution from a focus on semiconductor and AI stocks in the first quarter, to a renewed bet on Chinese internet companies in the second quarter

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By the third quarter, the focus intensified on Chinese equities, leading to a diverse investment strategy by the fourth quarter, illustrating the complex dynamics in an ever-changing market environment.

During the first quarter of last year, HHLR exhibited a distinct preference for the technology sector, especially in semiconductors and AIMore than half of the 20 new stocks acquired in that quarter were in the semiconductor and electronic tech sphere, including industry leaders like AMD, NVIDIA, and TSMC, which were driven by breakthroughs in global AI technology, particularly the explosive growth of generative AI that skyrocketed demand for computing powerConcurrently, HHLR executed large-scale reductions in its Chinese stock holdings, practically liquidating positions in JD.com, Alibaba, and iQIYI.

By the second quarter, HHLR experienced a significant pivot in its investment focusThe standout move was increasing its stake in Alibaba from a considerable sell-off at the end of the first quarter to acquiring an additional 5.24 million shares in the second quarter, making it the third-largest holding and accounting for 9.55% of the portfolioThis strategic shift capitalized on an opportunity to rectify Alibaba’s valuation and anticipated a pick-up in consumer activityHHLR continued increasing positions in Vipshop, NetEase, and Ctrip, while initiating a position in Futu Holdings, elevating the value of its Chinese equity holdings to 85%.

The third quarter saw HHLR push its concentrated strategy to the extreme, increasing the proportion of Chinese equities from 85% in the second quarter to 93%, with nine of the top ten holdings being Chinese firms, spanning e-commerce, biopharmaceuticals, and online travel, among othersBeiGene led with a staggering quarterly growth of 57.36%.

Simultaneously, HHLR adopted a cautious approach toward American tech stocks, liquidating its position in AMD and significantly reducing its stake in Microsoft while actively seeking new investment opportunities in AI and cloud computing

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This indicates HHLR's understanding that, despite the current complex market environment, technological innovation remains a key driver of economic growthEntering the fourth quarter, HHLR’s new investments and increases in holdings covered a diverse array of fields including technology, renewable energy, high-end equipment manufacturing, and integrated circuits, showcasing a diversified investment strategy.

Moreover, HHLR has implemented various measures to balance risk and returnsFor instance, after a significant rise in Pinduoduo's stock price, HHLR previously opted to trim its holding to lock in some profitsIn the fourth quarter, they reduced positions in eleven stocks including BeiGene, Alibaba, Ctrip, Sohu, and ZTO, most of which had seen substantial gainsThey also liquidated shares in Baidu and the global uranium tracking ETF URA, along with Huazhu and MetaFor a considerable time, BeiGene had been HHLR's primary holding, and since 2014, Hillhouse has supported BeiGene through eight rounds of financingBy the fourth quarter of 2024, BeiGene's share price reached a historical high not seen in a year and a half, posting over an 80% gain from April to October.

In December of last year, BeiGene announced that its shareholder HHLR and its affiliated entities had reduced their stake to 9.02%. Alibaba's share price saw a remarkable rise of 63% from July to October 2024. In the ongoing reassessment of Chinese tech stocks, Alibaba’s price continues to appreciateCtrip reported a maximum increase of around 80% from August 2024, while Sohu also achieved high points in its share price during the fourth quarterPresently, with U.S. stocks at historical highs, the rationale behind HHLR's portfolio adjustments in the fourth quarter involves both realizing partial gains and possibly controlling risk.

Interestingly, just a day before, Bridgewater Associates released their latest filings, which indicated a new position of 153,500 shares in Tesla in the fourth quarter, while significantly reducing holdings in the remaining six tech stocks from the 'big seven' U.S. tech giants

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