After its scale was cut in half, Banxia Investment spoke out: sticking to undervalued domestic demand assets, the trigger conditions for the AI bubble to burst have already appeared.
"Private Equity Witch Li Bei" and her managed firm, Banxia Investment, have once again become the focal point of heated market discussions.
On one hand, the firm's management scale continues to shrink. According to the China Fund Association, Banxia Investment's assets under management have dropped from over 10 billion RMB, successively falling below the 10 billion and 5 billion thresholds, and are now further down to the 2–5 billion range.
On the other hand, amid capital pressure, Li Bei issued the “Letter to Banxia Investors” monthly report on June 21st, explicitly warning of risks in the AI sector, believing that the trigger conditions for a bubble burst have already appeared, and earnestly advising those considering switching to AI investments to "be extremely cautious."
At the same time, she reiterated her optimistic logic regarding undervalued domestic assets such as real estate, consumption, and building materials, believing that current market pessimism is breeding structural opportunities for the next two years.
After net value drawdown, reducing positions for defense; core assets remain “on hold”
Li Bei admits that the fund’s net value saw a notable pullback last week, mainly due to simultaneous declines in core holdings—energy, real estate, consumption, and building materials.
Faced with market volatility, Banxia Investment has appropriately reduced its positions per risk control requirements, clearing out some less certain marginal holdings and further concentrating the portfolio on core assets with high absolute return certainty for the next two years. Currently, Banxia holds about 50% net equity positions, with roughly 60% net individual stock positions, and has configured put options on Hong Kong stock indices for risk hedging.
However, regarding core holdings, Li Bei made it clear she would not easily further reduce positions. In her view, the current portfolio’s leading stocks in consumption, real estate, and building materials are not bets on a short-term economic reversal, but are based on extremely low valuations and the companies’ inherent competitive advantages for long-term investment.
Continuing to bet on real estate: Key opportunity remains here
Real estate remains one of Banxia Investment’s most steadfast directions.
According to the monthly report, real estate accounts for about 25% of the portfolio. Li Bei believes, the market is pricing the real estate industry at its most pessimistic stage, but the actual operations of some leading real estate companies have already clearly improved.
She points out that since the second half of 2024, the net profit margin of new projects by quality developers has climbed back to around 10%, but because the real estate industry generally has a settlement cycle of around two years, high-profit projects have not yet appeared in financial statements.
In her view, by 2027, as high-profit projects gradually enter the settlement period, the profits of relevant companies will be significantly released, and the current market value is less than 5 times the forward PE.
Consumption and building materials: “Value troughs” at 10-times PE
Compared to real estate, in Li Bei’s view, consumption and building materials represent even more certain value troughs.
Banxia Investment's basket of leading consumption stocks had an average valuation of only 12-times PE at the start of the month, which has now dropped below 10 after recent adjustments. These companies span express delivery, dairy, sporting goods, and tourism services.
Li Bei believes, these companies were once granted valuations above 50-times PE; now compressed to around 10-times, their competitiveness is even stronger, making this mismatch an opportunity in itself.
The logic for the building materials sector is more straightforward. In an environment of universal industry losses, some leading companies are still profitable and continue to expand market share, currently valued at less than 10-times PE with a dividend yield around 5%. Even if industry prospects remain under pressure, investors can still receive stable returns; if the real estate cycle stabilizes and rebounds, there is clear earnings elasticity.
Signals of demand slowdown: Risks in AI sector outweigh opportunities
Li Bei is steadfastly optimistic about domestic assets, but is unusually cautious about the AI sector. She specifically advised investors in her monthly report, “Even if I get scolded, I must remind everyone: be very cautious in chasing AI."
She believes, the core issue of the AI industry chain is not valuation, but that the demand side is already showing signs of cooling. For example, the ARR growth of AI model companies like Anthropic is clearly slowing down, and is likely to fall short of market expectations by year-end, increasing the likelihood of downward adjustments in future capital expenditure forecasts.
Looking at the industry chain, the adjustment is spreading from the bottom up: large tech stocks have weakened first, GPU makers are under pressure, token prices have peaked and fallen, and AI application revenue growth is slowing. However, demand for training is still supporting computing power leasing, and the bullwhip effect means the semiconductor and electronics component sectors are temporarily maintaining high prosperity.
Li Bei points out that profits and valuations are at high levels, leading indicators have already fallen first, while lagging indicators continue to rise. Now is precisely the time to gradually exit, not to rush in and chase higher prices.
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