E Fund's Zhang Kun slashes consumer stocks on China economic fears
A prominent Chinese fund manager has liquidated major consumer holdings to pivot towards artificial intelligence, signaling deep institutional pessimism over the country's economic recovery.
Zhang Kun has abandoned his long-standing defense of China's consumer sector. The manager of the 20.8 billion yuan (US$3.1 billion) E Fund Blue Chip Selected Mixed Fund aggressively cut positions in major liquor distillers and e-commerce platforms during the second quarter. He rotated this capital into artificial intelligence-linked equities to align with the evolving dynamics of the stock market.
The portfolio overhaul involved steep reductions across several of the fund's largest holdings. Zhang slashed his stake in Kweichow Moutai by 47% to 968,500 shares. He cut Wuliangye Yibin by 71% to 7.53 million shares and reduced Luzhou Laojiao by 52% to 12.18 million shares. Outside of the liquor sector, the fund pared its position in Alibaba Group Holding by 75%. It held 5.78 million Hong Kong-traded shares in the tech giant at the end of June, down from 23.5 million in the first quarter.
These trades mark a sharp reversal for a stalwart manager who had previously championed the consumer sector's resilience. Zhang actually doubled down on his baijiu positions in the first quarter before this sudden liquidation. Explaining the shift in his quarterly report, Zhang pointed to deteriorating macroeconomic indicators. “Judging from the data on retail sales and employment, the downside pressure on the economy has exceeded expectations,” he wrote. “Households are turning more cautious about future expectations. Excessive household savings have kept rising to cope with the uncertainty arising from employment.”
The pivot reflects a broader institutional reassessment of China's domestic demand thesis. Retail sales have remained sluggish as consumption cratered amid a worsening job market and falling property prices. High-end baijiu sales are plunging on falling demand, while online shopping is stalling due to reduced subsidies from e-commerce platforms.
For market participants, Zhang's exit from these bellwether consumer names serves as a telling indicator of sentiment. It demonstrates how severely persistent macroeconomic headwinds are overriding historical convictions about the sector's defensive qualities. As household savings continue to rise, fund managers are finding fewer reasons to maintain exposure to traditional consumption plays.
