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Liu increased stock holdings in Fund Taihe, his 5.31 billion yuan, or $696 million, fund, even during a 16 percent, four-day rout that started May 30. He used up almost all his cash to buy pharmaceutical, engineering and insurance companies because, he said, their share prices will more than double in the next three years.

The period was "a great opportunity to buy," Liu, who is 29, said in an interview in Beijing, where he runs the fund for Harvest Fund Management. "After bubbles burst, they eventually have to rise, don't they?"

He was right, at least for now. The CSI 300 index has almost reclaimed its record and has doubled this year, making it the best major stock benchmark in the world, according to data compiled by Bloomberg.

Taihe, which Liu says does not have a benchmark, has posted a 338 percent return in the past 12 months, the best among 601 China-focused funds tracked by Bloomberg. The Shanghai A-Share Stock Price index, which tracks yuan-denominated stocks, has returned 172 percent in the period; the CSI index has tripled.

Contributing to that performance have been Liu's investments in Hudong Heavy Machinery, China's biggest maker of ship engines, whose shares have surged almost sixfold in the past year, and Shandong Dong-E E-Jiao, which makes traditional Chinese medicines and health food. It has more than tripled in the period.

Taihe can invest only in Chinese A shares. The fund holds up to 80 percent of its assets in equities and keeps around 3 percent in cash. Up to 20 percent is invested in bonds.

Liu said he has been trimming steelmakers, whose dividends he is finding less attractive. He declined to name specific stocks because of restrictions on disclosure of holdings before the release of the fund's quarterly report.

Health care and engineering companies "have very good fundamentals," Liu said. "They have steady cash flow. Insurers have stable premiums."

The CSI index jumped 17 percent in the seven days ending Wednesday. It had fallen after the government tripled the tax on securities on May 29.

Greenspan, the former U.S. Federal Reserve chairman, and Li, the Hong Kong magnate, warned in May of a sharp drop in share prices, comments that helped fuel the end-of-month plunge.

Liu worked as a research analyst at China Merchants Securities before joining Harvest in April 2003. Harvest, 19.5 percent owned by Deutsche Asset Management, is China's biggest fund manager in terms of market share, according to Shanghai-based Z-Ben Advisors.

Grace Tam, a Hong Kong-based manager of investment services at JF Asset Management, said government measures to prevent asset bubbles and excessive investment were a threat to Chinese shares. This year, the central bank has raised borrowing costs twice and ordered lenders to set aside more of their deposits as reserves five times.

"Major risks in the A-share market are volatility and also policy," Tam said. "There may be further increases in interest rates and banks' required reserve ratios, or other unexpected measures."

JF Asset Management is allowed under the qualified foreign institutional investor program to invest in Chinese stocks. Tam said she had been trimming back some of her holdings in shares "that have enjoyed a good run," like those of banks.

Still, Liu is finding bargains by using a so-called bottom-up strategy, which concentrates on individual stocks without considering possible changes in economic trends.

"A lot of stocks have entered the area where you want to buy," said Liu. "When the market is pessimistic, it fails to see there are still a lot of positive factors. Market movements and macro economic trends are only for reference when I make adjustments to my portfolio."

Besides, government efforts to damp appetite for equities were aimed at individual investors, Liu said. Such investors account for about 60 percent of the market, according to Wu Jianxiong, an analyst at Guotai Junan Securities in Shanghai.

Liu spends one-third of his time visiting companies and hardly ever buys the stock of one not covered by analysts.

"I'm seldom the first one to discover a stock and buy it," he said. "People are crucial. Sector allocation, on the other hand, is only supplementary."

He also has to be certain about a company's growth outlook, even if that means forfeiting returns. He declined to buy the shares of Sany Heavy Industry, the nation's biggest maker of pumps for concrete, when they were first recommended to him in June last year because of "lack of stability" in the company's earnings history. He missed out on a 124 percent gain in its share price in the second half.

After visiting the company, he bought the shares in January. The stake is now Taihe's fourth biggest. Sany Heavy has jumped 165 percent in 2007 as first-quarter profit surged sixfold because a construction boom helped it sell more machines.

Though Liu says he likes to hold on to his stocks, he admits that he often has to roll with the dice.

"I do want to hold stocks for, say, five years, but in a market as volatile as the one that we have here, share prices sometimes jump and reach my target in just one day, so what am I supposed to do?" Liu said. "It wouldn't make sense not to sell them in a short time under such circumstances."

Almost half of Taihe's assets are invested in manufacturers because Harvest analysts have conducted in-depth research on the companies, he said.

Hudong Heavy, the fund's top holding, has jumped 280 percent this year. Net income at the company almost doubled last year on increased sales.

"As a fund manager, I don't want to win by betting on overall market movements," he said. "I rely on making good stock selection and portfolio construction to make money. I've reaped good returns from recent market consolidation."