Chinese investors prefer Baidu for Google as it lost its Market in China

When Google, owner of the most popular Internet search engine, said on January 12 it may close its website in China, Edinburgh money man
ager James Anderson sold the stock and bought Beijing-based rival Baidu Inc.

Since then, Baidu has risen 34% and Google has lost 8.5%. That kind of call helped propel Anderson’s closed- end fund, Baillie Gifford & Co’s £1.87 billion ($2.8 billion) Scottish Mortgage Trust Plc, to the best performance among its UK peers over the past year.

“Google was admitting they had lost in China,” said Anderson, who is Baillie Gifford’s chief investment officer and responsible for £56 billion in total. “It was revealing and added to the imputed value of Baidu.”


Fund managers in the Scottish capital are increasingly moving their money to reflect the shift in economic power to countries such as China and Brazil from the US and Europe.

Scottish Mortgage has 60% of its assets in the US, UK and other European stocks, down from 80% in 2004, and Anderson expects that to fall further. The century-old Scottish Mortgage Trust’s biggest holding is Rio de Janeiro-based Petroleo Brasileiro SA, Brazil’s state- controlled oil producer, making up 5.1% of the fund. The company, known as Petrobras, is also the biggest stake for Murray International Trust Plc, another Edinburgh fund.

“I like my ideas to come from the countries producing economic growth,” said Anderson, 50.

The switch to Baidu from Google meant each company accounted for 2.7% of Scottish Mortgage’s assets as of January 31, putting the Internet search companies among the fund’s 10 largest holdings. “We find many, many more individual Chinese companies that are great secular growth companies similar to what you saw in America,” Anderson said in an interview at his Edinburgh office . “China is a special category beyond all others.”

Scottish Mortgage, Baillie Gifford’s first client, was founded in 1909 to invest in rubber estates in Malaysia and Sri Lanka to benefit from demand for automobile tires.