Zhang Kun's latest statement: Domestic consumption is greatly underestimated! Future domestic consumption growth will be higher than overseas GDP

Outstanding fund managers are often able to "keenly" grasp the "bull's nose" of the market and subsequently make forward-looking "predictions" that stand out with their personal style.

Zhang Kun's latest quarterly report is a prime example.

In his latest Q3 2025 report, Zhang Kun provided a distinctly "different" prediction regarding the domestic demand, consumption growth, and sluggish price index that the market generally views as "pessimistic." He firmly believes that:

"Mr. Market" has overly magnified the short-term adverse factors of China's domestic demand while neglecting the long-term important structural factors;

The most likely scenario in the future is "China's consumption growth > China's GDP growth > global GDP growth";

The scale effect of a unified huge market of 1.4 billion people in terms of products, research and development, and sales cannot be ignored;

(Excellent) enterprises can amplify their advantages more fully within the unified large market;

In the long run, China does not need to worry, as there are precedents from other countries, and the decision-making body has sufficient tools and wisdom to solve problems.

As the Shanghai Composite Index approaches 4,000 points, and the food and beverage industry, heavily held by Zhang Kun, still shows a negative return for the year (as of October 27), Zhang Kun not only did not waver in his holdings and portfolio. On the contrary, he systematically elaborated on his personal investment logic, the differences with the market, and his confidence in China's domestic demand market and economy multiple times in the quarterly report.

Such a spirit of "I will go forward despite the thousands of people" is quite admirable. Will his views be validated in the market in the coming phase? When will Zhang Kun recreate his glorious moments?

This is clearly a very intriguing topic.

Starting to Outperform in Q3

Zhang Kun's fund products showed clear signs of "catching up" in Q3 2025, which is a highlight of his quarterly report.

Taking Zhang Kun's representative fund "E Fund Quality Enterprises" as an example, this fund surged by 15.81% in Q3 this year, exceeding the performance benchmark by 2.56 percentage points (see chart below).

This performance marks a turnaround from several of Zhang Kun's managed funds that had previously underperformed the "benchmark" in the past few quarters. The latter may indicate that the market style is developing in a direction more suitable for his style.

Heavy Holdings Start to Perform

The outstanding performance of Zhang Kun is related to the strong performance of individual stocks such as Tencent Holdings (Hong Kong), Alibaba (Hong Kong), and JD Health (Hong Kong), which he has consistently held heavily over the past few quarters.

Preliminary statistics show that these three companies have risen by 32% to 61% in the past quarter, contributing significantly to the A-share funds managed by Zhang Kun.

Additionally, some of the liquor stocks (Lao Jiao, Shanxi Fenjiu) that Zhang Kun has long favored also saw an increase of over 10% in Q3, which has led to the net value of Zhang Kun's funds beginning to surpass the benchmark

Not Following "Market Trends"

Although Tencent and Alibaba's market performance is closely related to the market's perception of their future potential in the AI sector, Zhang Kun is clearly not a fund manager who chases short-term market fads.

Zhang Kun stated that the market's trends are difficult to predict, but he will adhere to his own investment style, conducting in-depth bottom-up research to find companies with excellent business models, significant competitiveness and bargaining power, industries with sustained growth potential, and management teams that can wisely reallocate capital. By holding these companies for the long term, he aims to share in their free cash flow and intrinsic value growth as a shareholder.

This statement clearly informs holders that even if his heavily weighted stocks hit a certain "trend," his criteria for buying and holding remain the ability of these companies to generate free cash flow and enhance intrinsic value.

This ability is attributed to:

1. Excellent business models, 2. Significant competitiveness and bargaining power, 3. Industries with sustained growth potential, 4. Wise capital reallocation by the company's management team.

Beware of "Mr. Market" Sentiment

Additionally, in this season's quarterly report, Zhang Kun also extensively reminded investors and holders to "resist" the influence of Mr. Market.

He summarized in the quarterly report that while "Mr. Market" (a term from Graham's book referring to the market) may accurately "weigh" a company's value in the long term, in the short term, Mr. Market's sentiment is often unstable, sometimes overly excited and sometimes overly depressed, amplifying short-term factors while neglecting important long-term structural factors.

He used the mainland real estate market as an example, noting that real estate sales have nearly halved compared to four years ago, and "Mr. Market" reacted by linearly extrapolating the short-term difficulties.

The Market Greatly Underestimates Domestic Demand and Consumption Potential

These preliminary conclusions ultimately converge into one conclusion: Zhang Kun believes that Mr. Market has overly underestimated China's domestic demand potential and consumption.

He explicitly stated that the market has overlooked the long-term (favorable) structural factors behind China's domestic demand, which should not be the case.

He mentioned that in the past two years, the domestic GDP deflator has remained negative, the CPI for the first half of this year has not been positive, and real estate sales have nearly halved compared to four years ago, leading "Mr. Market" to react by linearly extrapolating the short-term difficulties.

However, according to World Bank statistics, although China's GDP total ranks second globally, in 2024, China will still be a developing country with a per capita GDP of about $13,000, slightly below the global average. Considering the important meetings have proposed the goal of "reaching a per capita GDP of a moderately developed level by 2035," there is at least reason to believe that China's GDP growth rate will exceed the global average.

At the same time, the proportion of Chinese residents' consumption in GDP is already close to the lowest level among major countries globally. Zhang Kun believes that the probability of this proportion increasing is far greater than the probability of it continuing to decline In summary, in the long term, he believes the most likely scenario is "China's consumption growth rate > China's GDP growth rate > global GDP growth rate".

There is no need to worry about the domestic economy in the long term

He further stated that another challenge for "Mr. Market" is the negative cycle of price indices. For more than the past two years, China's nominal GDP growth rate has been lower than the actual GDP growth rate, while the revenue growth rate of enterprises is more closely related to the nominal GDP growth rate, and the increase in costs depends on the bargaining power along the industrial chain.

Overall, for excellent companies, an inflationary environment is like sailing with the wind, making operational difficulties relatively smaller, which is one of the reasons why export companies generally feel better.

The commander believes that compared to operating in several small markets with differences (overseas), the scale effects of a unified huge market of 1.4 billion people (domestically) cannot be ignored, allowing companies to amplify their advantages more fully. He believes that "Mr. Market's" pessimism only amplifies short-term difficulties and does not have a long-term basis.

Zhang Kun believes that there is no need to worry about this in the long term, as there are cases from other countries to draw from, and the decision-making body has sufficient tools and wisdom to solve problems.

Focus Media enters heavy positions

Overall, the several funds managed by Zhang Kun have maintained stable stock positions, only adjusting the structure among sectors, including pharmaceuticals, consumption, and technology.

On the consumption side, it must be said that Zhang Kun is indeed optimistic about domestic demand, with Focus Media being quite prominent in this quarterly report.

Taking the E Fund Blue Chip Fund as an example, among the top ten heavy positions, Focus Media has entered the top ten heavy positions, while SF Holding has exited.

Previously, Focus Media had appeared multiple times in "mid-tier holdings," but this is the first time it has broken through to appear on the list of heavy stocks in the E Fund Blue Chip Fund.

However, compared to the complete holdings list in the semi-annual report, Zhang Kun did not make any adjustments to this stock in the third quarter.

An even clearer reflection of his attitude towards Focus Media is seen in the E Fund Quality Select Fund. In the top ten heavy positions of this fund, SF Holding and Prada have exited, while JD Health and Focus Media have newly entered. Among them, Zhang Kun actively increased his holdings in Focus Media by 33.33%.

Attached image: E Fund Blue Chip heavy positions

Is technology shifting from hardware to software?

The list of heavy positions in the E Fund Asia Select Fund may better reflect views on technology stocks.

The largest heavy position from the previous quarter, SK Hynix, along with ASML Holding, has exited the heavy positions list, while Google and Prada have newly entered.

Among them, Prada is a historical old face, but Google is entering the heavy positions list for the first time since Zhang Kun took over the E Fund Asia Select in 2014.

The semiconductor industry is a typical cyclical industry. SK Hynix specializes in memory chips, while ASML is a lithography machine manufacturer. Zhang Kun may have certain views on the growth cycle of semiconductor hardware, reallocating funds to the more certain, cyclical AI software and service company Google Risk Warning and Disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk