Hong Kong Hedge Fund Adds to Baidu, Samsonite After Brexit

(Bloomberg) -- Manas Capital, a Hong Kong-based long-short equity fund, added to bullish wagers on companies including Baidu Inc. and Samsonite International SA after shares got cheaper following the U.K.'s vote to leave the European Union.

Apart from buying more shares of Chinese internet company Baidu and luggage manufacturer Samsonite, the firm's Manas Asian Equities Value Fund added to its stake in chocolate maker Delfi Ltd, said Anuj Sehgal, founder and portfolio manager. The fund, which invests in Greater China, India and Southeast Asia, is up an estimated 6.3 percent so far this year, and gained 3.8 percent in June, according to the firm.

“Brexit represents a political crisis more than an economic crisis,” Sehgal said in an interview in Hong Kong. “There will be economic issues, but they will play out. The valuations on these companies were cheap enough to add to our existing positions.”

The Manas fund added to the shares as $3.6 trillion in market value was wiped out from global stocks in the wake of the British vote. Many markets reversed losses in the week after the referendum as central banks signaled that they were ready to step in and provide support.

Sehgal, who previously worked with JPMorgan Chase & Co., Nomura Holdings Inc. and hedge fund North of South Capital in Hong Kong, in 2012 started Manas, which means “mind” in Sanskrit. He declined to say how many additional shares the fund purchased in the three companies.

Delfi Gains

The moves are already paying off in one instance, as shares of Delfi gained 38 percent in a single day after Aberdeen Asset Managers Ltd. announced in a June 29 regulatory filing that it is purchasing shares. While Delfi shares fell 44 percent last year due to weak consumption, increasing raw material prices and a weakening rupiah, the “business has started to recover and the stock is attractive based on normalized earnings,” Sehgal said. The shares have advanced about 14 percent this year.

Samsonite, which is already the world's largest luggage maker with a 10 percent market share, stands to “gain market share globally” once its acquisition of luxury baggage maker Tumi Holdings Inc. is finalized, Sehgal said. Earlier this year, Samsonite announced plans to buy Tumi for $1.8 billion. Samsonite's Hong Kong-listed shares have fallen 5.3 percent since the Brexit vote, bringing their year-to-date decline to 7.3 percent.

Baidu Optimism

On Baidu, Sehgal said he is optimistic even with the company facing a government investigation following the death of a student who sought out a controversial treatment for a rare form of cancer among search results, he said. Baidu shares tumbled 7.9 percent on May 2 on news that a team of investigators from the Cyberspace Administration of China, the national health commission and the top industry regulator, would probe Baidu's compliance with online regulations. The shares, which fell another 4.3 percent in the two days following the Brexit vote, have declined 14.4 percent this year.

"While in the near term the challenges due to healthcare-related ads will impact revenue, longer term we believe the business and Baidu's moat will improve," he said. "The core search business is extremely attractively valued once you strip out the investments and new businesses."

To contact Bloomberg News staff for this story: Suzy Waite in Hong Kong at swaite8@bloomberg.net. To contact the editors responsible for this story: Nathaniel E. Baker at nbaker14@bloomberg.net, Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net.