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Lau said despite the bull run on oil and mining stocks, he felt uneasy about the current valuations and was looking to reduce his fund's exposure to the industry as a result.

"We have been cutting back on our oil exposure since last year," he said. "Everyone is bullish on oil, and it may continue to do well, but based on current share prices – which are pricing in $85-90 long term price – I just feel a bit nervous, given the whole world is not that rosy at the moment."

In China, owing to the government's fixing of tariffs on certain utilities, companies producing energy could be hit with rising costs without being able to pass this on to the consumer.

The fund, which holds roughly 60 stocks in its portfolio, has returned 130.2 per cent over three years to 8 May, and ranks fifth out of 60 in the IMA's Asia Pacific ex-Japan sector over three years. Its short term performance is also strong, ranking first over three months.

Lau said his fund had maintained a strong performance despite the Chinese market's turbulence by ignoring the macro noise and focusing on good quality companies with longevity.

"In China, there is always either a dream or a fear - people are either very excited or very nervous about something.

"In 2003, with Sars and everything else, people didn't think Hong Kong had a future. Last year it was Taiwan, and not very long ago people thought it was the end of China altogether.

"By sticking to our investment discipline, we get around the greed and the fear in the market."

For more information, see next week's issue of Investment Adviser (19th May).