Incisive Chinese companies have long been sinking their teeth into their western rivals. Now the country has developed its answer to the “Fangs” phenomenon, one of the remaining crown jewels of the west.

The internet-focused quartet of Facebook, Amazon, Netflix and Google (now renamed Alphabet, awkwardly) saw their share prices surge more than 70 per cent, on average, last year, even as the wider US stock market fell.

Now China is responding with its very own quartet of Bants — Baidu, Alibaba, Netease and Tencent.

Since 2013, emerging market equity funds have quadrupled their exposure to China’s new Gang of Four to more than 4 per cent, equivalent to $11bn, according to data from Copley Fund Research, which tracks 121 EM equity funds with combined assets of $235bn.

Tencent has led the way, with its weighting in the average EM fund rising fourfold to more than 2 per cent since 2011, but Alibaba has shown explosive growth of late, as the first chart shows.

“You can draw parallels to the Fang stocks in the US being, as they are, a mixture of internet search, social networks and ecommerce companies. These four stocks are starting to dominate things in the internet space in emerging markets,” says Steven Holden, founder of Copley.

Gary Greenberg, head of emerging markets at Hermes Investment Management, who has a weighting of 10.8 per cent to the Bants in his Global EM fund, adds: “We think there is growth here that can continue, cash flow generation that is remarkable relative to Chinese old economy industries, along with some real innovation and disruption.

“Their underlying economy is growing, especially the consumer service sector, disclosure is steadily improving and scepticism among the international community is high [preventing valuations from rising too far],” Mr Greenberg says.

The rise of the Bants has helped drive a dramatic reshaping of EM equity portfolios since 2012. Allocations to technology stocks in general have risen sharply, hitting a record 20.6 per cent in March, according to Copley, while holdings of energy and materials stocks have slumped in line with plunging commodity prices, as the second chart shows.

Within the internet subsector, which constitutes 6 per cent of the typical EM fund, however, the Chinese heavyweights appear to be elbowing aside their competition.

Chinese companies now account for 83 per cent of EM equity funds’ internet holdings, with Russia and South Korea accounting for a further 10 per cent between them.

However, the latter are on the slide, with the rise of Bants largely supplanting ownership of more established internet names such as Naver, South Korea’s biggest internet portal operator, and Mail.ru, the internet group controlled by Russian billionaire Alisher Usmanov, Mr Holden says. (For those who get hot under the collar about South Korea being classed as an emerging market, equity investors are largely guided by the MSCI EM index, which includes the likes of South Korea, Taiwan and Singapore.)

“What is becoming clear is the emergence of a ‘big four’ [which] are starting to dominate the sector,” says Mr Holden, with 79 per cent of EM funds holding at least one of the Bants.

Funds managed by Oppenheimer, William Blair, Calamos, Columbia and Delaware as well as Hermes, each have an exposure of at least 8 per cent to the Bants, while Edinburgh-based Baillie Gifford leads the way with weightings of 13.3 per cent and 12.8 per cent respectively in its EM Leading Companies and EM Growth funds respectively.

Richard Sneller, head of emerging market equities at Baillie Gifford, told EM Squared this year that “in many emerging markets the speed with which young consumers are adapting to technological change, in areas such as ecommerce and online shopping, is much faster than in the US.

“Trends that we hoped would emerge 15-20 years ago have come to generate significant cash flows.”

The surge in demand for the Bants was in part a response to MSCI’s decision to include some companies listed outside the emerging markets in its flagship EM index.

The move, the first stage of which came into effect in November 2015, brought New York-listed Baidu, Netease and Alibaba into the index for the first time, a move that appears to have particularly boosted the latter.

“Alibaba has captured the largest number of new investors over the last six months. A net 15 per cent of funds opened new positions including TT International, Schroders and Lazard among others,” says Mr Holden, who calculates that the funds in his database have invested a net $840m in Alibaba in the past half year.

Mutual funds’ holdings of the Bants could rise to higher levels still, with the index weighting of Alibaba, Baidu and Netease due to rise further in May, when MSCI implements the second and final stage of its plan to fully incorporate such stocks in its EM index.

Mr Greenberg argues that valuations “are not unreasonable” with Tencent trading on 25 times one-year forward earnings, Alibaba at 23 times and Baidu 21 times [he does not hold Netease] “given that their earnings are expected to grow by 25-30 per cent per annum”.

“These are good businesses at reasonable prices, especially since smartphone usage is increasing and penetration for commerce, advertising and services online is also growing rapidly, providing opportunities for monetisation of the user base,” he adds.

Mr Holden sees other reasons to expect their weighting to rise still further. More than 20 per cent of funds still do not have any exposure to any of these four stocks, with some high-profile managers, such as Aberdeen and First State, eschewing Chinese internet stocks entirely, Mr Holden says.

Moreover, the funds in his database are still, in aggregate, underweight both Tencent and Alibaba compared with their index weighting.

“In the face of impressive price action in Tencent, Baidu and Alibaba from the lows of early February, EM funds may find it more difficult to avoid these stocks going forwards,” he says.