Lumenary makes first direct China investment

Lumenary Investment Management has made its first direct investment into China via an education company as the fund reduces its reliance on the US.

Education companies came under the spotlight earlier this year after China began a crackdown on private tutoring companies with a Government department developed to regulate the industry.

Change included a ban on private companies tutoring for profit and tutoring companies were banned from being listed or raising overseas capital.

This was a drastic move as the sector was estimated to be valued at $140 billion and it led to share price falls of around 50% to 60%.

Lawrence Lam, managing director and founder of Lumenary, said: “This is a perfect example of how to take the opportunities Ms Market offers you, rather than trying to out-predict her. As each piece of news hit, stock prices fell further. In the space of a few weeks, companies which were previously too expensive no longer were”.

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With this in mind, he was able to pick up an education company for his Global Founders fund which had been unaffected by the reform and was trading at a 50% discount.

“I made our first direct investment in the Shenzhen A-shares market via an education company unaffected by the proposed reforms, yet saw its share price discounted by over 50%,” he said.

“When market panic ensued, investors sold wantonly and everything fell. For me it was the ideal opportunity to reduce dependence on US markets and de-risk the portfolio, a goal I've had for a while.”

The purchase had the added benefit of diversifying the fund’s geographic allocation with the fund now holding 9.3% to China and 29.9% to the US.