Why one fund manager is bullish on Alibaba and Tencent despite regulatory fears

Published Tue, Sep 21 20218:07 PM EDT

Billions of dollars have been wiped off the market value of China's internet giants as Beijing steps up scrutiny over its tech companies — but one fund manager sees opportunity in stocks like Alibaba and Tencent . He says it's time to "start scaling in." "We do still like Asian tech, and I think a fair bit of the … episode or the concern or the risk premia has been priced into at least the majors there," Nicholas Ferres, founding partner and chief investment officer at Vantage Point Asset Management, told CNBC's "Squawk Box Asia" on Monday. Ferres said he likes Alibaba and Tencent, and both stocks are currently in his basket of tech picks for Asia. Others include chipmakers Taiwan Semiconductor Manufacturing Company and South Korea's Samsung Electronics. Investors have been selling off Chinese tech stocks in Hong Kong this year, as regulatory uncertainty continues to weigh heavily on the sector. As of Tuesday's close, Hong Kong-listed shares of Alibaba has plunged around 36% and Tencent is down about 20% year-to-date, while the Hang Seng Tech index has declined roughly 26% during the same period. Beyond the regulatory clouds surrounding Chinese tech, Ferres also cited a weak credit impulse in China — the rate of credit growth as a share of GDP. According to the fund manager, it currently sits at a similar level to where it was in 2012 and 2015. The current slowdown in credit growth comes as debt risks in China grow , with fears that a spillover effect at indebted developer China Evergrande Group could result in a "domino effect" in the property sector . Ferres recalled an article in The Economist in 2015, entitled " The Great Fall of China ," which discussed the major plunge in the Chinese stock markets that made investors nervous due to a possible contagion effect. When there's "maximum concern" or a "behavior of fear," it's usually "an opportunity ... to start scaling in," he said. Mainland Chinese stocks return to trade on Wednesday following holidays on Monday and Tuesday. Investors will be watching for market reaction there after Hong Kong's Hang Seng index plunged more than 3% earlier this week amid fears of contagion from the Evergrande fallout.