A Global Perspective On "China'S Stock Market": Investment Logic Of Snow Lake Capital

"We use our mature investment system established in the US capital market to invest in overseas listed Chinese companies. Compared with other overseas funds, we have a better understanding of the internal logic of the core business development of Chinese companies. Compared with China's local funds, we know more about the rules of the western capital market. Snow Lake Capital founder and CEO Ma Ziming said.

It is understood that the snow lake capital, founded in 2009, is a hedge fund management company focused on Asian markets. It mainly invests in the Chinese listed stocks listed overseas, holding long-term holdings for some quality companies such as good future, Wah Group and so on. It is also one of the cornerstone investors of last year's salvage.

At present, Xue Hu capital has three overseas funds, and its asset management scale exceeds 2 billion US dollars. The fund's LP is global institutional investors, including endowments, non-profit foundations, family funds, state sovereign wealth funds and pension funds.

Recently, Ma Ming Ming, in an interview with the twenty-first Century economic report, talked about the logic of investment in the stock market, the difference between the two level market investment and the primary market investment, and the opportunity to invest in hedge funds in the future.

Global perspective on China stock option company

Before founding snow lake capital, Ma Ziming worked in a New York based hedge fund focused on investing in Asia, responsible for China related investment research. Earlier, he was a member of the top hedge fund ZIF Brothers investment company global long term equity investment team. In 2009, Ma Ming Ming returned to China to set up snow lake capital and got the support of Zhang Lei, founder of high allocating capital. "Zhang Lei is my first investor and my mentor. I respect him very much." Ma Ziming said.

At present, snow lake capital has not yet launched a hedge fund business in the mainland of China. Its investment is mainly for Chinese companies listed in the US market and the Hongkong market. For China's mainland market, Xue Hu capital has invested some qualified A share companies through Shanghai and Hong Kong.

Ma Zi Ming, who has worked in the US stock market for many years and has served in the Hongkong stock exchange's IPC, has a deep understanding of the differences between the US stock market, the Hong Kong stock market and the mainland's capital market.

He believes that the core of the stock exchange is to provide reasonable pricing and financing channels for the company. Although the A share index has not seen a significant increase over the years, the total market capitalization of A shares has increased by nearly two times over the past ten years, and the number of listed companies has increased from 1700 to 3800. We are more willing to give white horse shares to higher premium companies.

The Hong Kong Stock Exchange's reform of the same share last year is a historic landmark for HKEx and technology companies. This may also be one of the main reasons why the technology companies such as Xiaomi, USA and Alibaba have chosen to list in Hongkong. It is understood that Ma Zhi Ming in the Hongkong Securities Regulatory Commission, the Stock Exchange Commission has also actively participated in the discussions on the different rights reform of the same stock market, from the perspective of market participants to give more suggestions and comments.

For the US stock market, although the index is at a relatively high level, China's Listed Companies in the United States have broken down in recent two years. Ma Ziming believes that on the one hand, this may be because the investment bank itself is relatively priced, but the company is not worth so much money. The market break reflects the investors' discrimination and attitude towards these companies. On the other hand, American investors now know more about China than they did ten years ago or twenty years ago. Some truly qualified Chinese companies will not break the market.

Ma Ziming believes that in recent years, Pan Asian two tier market investment is emerging new market opportunities, and snow lake capital last year set up a Pan Asian regional equity hedge funds, so far, the annual rate of return of 46% (the same period MSCI Asia Pacific benchmark index annual growth of minus 4%). He said that about 40% of the listed Korean companies now have Chinese elements, and more and more opportunities will emerge as bilateral transactions between China and Korea, China and Japan increase.

"In the past, Korean institutional investors may have a deep view of local companies, but when Korean listed companies grow more and more from China, they may not have the ability to see what is going on in China." Ma Ziming said.

For example, a famous Japanese cosmetic brand has 40% of its revenue from Chinese consumers, and 70% of its revenue growth is also contributed by the Chinese market. For Japanese securities analysts, they may not understand what is going on in China. But Xue Hu capital can collect first-hand information in China, and analyze the Growth Logic of cosmetics consumption behind the hot news.

"Our team has partners from Korea and Japan. They have 15 years of investment experience in the local market. Combined with the experience of the Chinese team, we have a strong Pan Asian investment capability." Ma Ziming said.

Three logical grasp of hedge fund investment

Ma Zi Ming said that there are three support points when investing. First, the cognitive dividend, for example, compared with foreign hedge fund managers, the team of Xue Hu capital can speak Chinese, understand Chinese companies more clearly and get dividends; two, research ability, compared with the local fund managers in China, the team of Xue Hu capital can see more, see deeply, think of others' unexpected places with the same information, with the help of western mature market investment experience and strong research ability; three, psychological level, the judgment of market sentiment. "This is also the best place to see Kungfu when you pass a trick."

"We also realize that in another ten years, we will speak Chinese and understand more and more Chinese companies' foreign funds. Our strength in this area will gradually fade away. But we are striving to improve the ability of the latter two aspects, which requires long-term accumulation and training. Ma Ziming said. The team hopes to grow and become a more than ten billion dollar hedge fund in Asia.

When selecting the target companies, snow lake capital pays great attention to the choice of subdivision industries. Mr Ma said that first of all, he favored the industry that could grow more than 10% annually in the Chinese market in the next 35 years. Then the team chooses the leading companies in the industry to invest.

"We may all be optimistic about the large consumer market under the background of consumption upgrading, but there are still some controversies about whether some sectors will have better development in the next ten years because of higher permeability." He analyzed.

For example, in China, the per capita consumption of instant noodles is already high in the world, and it is difficult to maintain a good growth momentum. And there are American groups, hungry and other takeaway software, so that instant noodles are not the most cost-effective choice. So the instant noodle industry may not be suitable for further investment. In contrast, Xue Hu capital is more optimistic about sports and other mental consumption industries.

"While we invest mainly in Chinese enterprises, we will make global analysis and judgment rather than be confined to the Chinese market when selecting industries. We will analyze what changes have taken place in the global industry over the past one hundred years, and then get the specific framework of the Chinese market to analyze. This is also the most competitive capital of snow lake, he said.

"Some hedge funds will choose to go up in the later stage and invest in the primary market from the two tier market. But our path is not the same. We do not want to participate in the fierce competition in the primary market. Instead, we feel that there are new opportunities in the two tier market, and that is our advantage. Ma Ziming said.

In his view, the private sector investment in the primary market requires the ability of the organization to be outstanding in two aspects: first, the ability to use resources to find good projects; and two, the ability to design gambling agreements and investment terms after finding a project.

With the current accumulation of snow lake capital, the team is best at researching the company and its industry from beginning to end. Therefore, the team chose to continue to focus on the two tier market, to play their strong investment research capabilities.