Hedge fund managers are increasingly looking beyond China’s artificial intelligence boom, instead focusing on overlooked domestic champions and niche sectors as they search for differentiated opportunities in the region, according to a report by Fund Selector Asia.
At the Sohn Investment Conference in Hong Kong, several portfolio managers highlighted that while AI-related stocks continue to dominate headlines, they are not the primary focus for many active hedge fund strategies in China.
Instead, presenters pointed to less crowded areas of the market, including industrial and consumer-facing businesses with strong domestic positions and potential for global expansion.
One such idea was Yutong Bus, pitched by Krace Zhou, chief investment officer of StillBrook Capital. The company, a leading manufacturer of buses in China and a major global player in electric bus production, was described as a structurally strong but under-appreciated business.
Zhou argued that Yutong’s leadership in scale, cost efficiency and technology gives it a competitive edge, while its relatively limited geopolitical exposure makes it more attractive compared with higher-profile Chinese technology names.
Despite its dominant domestic position, the company still has modest international penetration, suggesting potential for overseas growth as electric vehicle adoption in public transport accelerates globally.
Elsewhere at the conference, Silas Xu of Toroa Management highlighted Angelalign Technology, a Hong Kong-listed orthodontics company competing in the global clear aligner market.
Xu described the company as an innovator in dental technology, noting its strong reputation among practitioners and its growing international market share. While already a major player in China, he argued that its relatively smaller global footprint could provide further expansion opportunities.
The broader investment backdrop reflects what some fund managers describe as a “two-track” China equity market.
According to Morningstar research, artificial intelligence remains a dominant narrative, but there is no clear consensus among fund managers on how to allocate to AI-related themes within China. At the same time, attention is shifting toward undervalued sectors where earnings visibility and pricing power may be more stable.
These include consumer and industrial segments that have lagged more prominent technology names but may offer opportunities as investor sentiment becomes more selective.
However, not all hedge fund participants at the conference were constructive on China equities.
Henry Liang of Seahawk China Dynamic Fund presented a bearish case on Hong Kong-listed Cosco Shipping, arguing that the crude tanker shipping industry suffers from structural weaknesses, including low barriers to entry, fragmented competition and limited pricing power.
He suggested that while geopolitical events can temporarily lift freight rates, the sector remains highly cyclical and prone to extended periods of weak profitability when supply outpaces demand.
Overall, the conference highlighted a more selective approach among hedge funds toward Chinese markets, with investors increasingly differentiating between high-profile growth themes and less crowded, value-driven opportunities.
