Hedgeweek reported last week how well Hugh Hendry’s China Short fund had performed this year, returning over 50 per cent to investors by buying CDS of Japa
Hedgeweek reported last week how well Hugh Hendry’s China Short fund had performed this year, returning over 50 per cent to investors by buying CDS of Japanese corporates with high exposure to the mainland. Reuters continued the theme this week, reporting that hedge funds shorting predominantly property and auto stocks have likewise managed to generate outsized returns. It reported that the USD60million Ariose China Growth Fund was up 35 per cent according to sources, while the USD1.7billion Dragon Billion China Fund was up 13.5 per cent through October. Profits appear to have been derived largely by shorting stocks in the property, auto and railroad sectors in addition to tactical shorts in consumer discretionary. Harvey Twomey, head of prime brokerage distribution for Deutsche Bank in Asia Pacific, was quoted as saying: “The outperformers were adept at getting their shorts right, and recognizing the limited opportunity to capitalize on market momentum.” Direct shorting opportunities in China remain highly limited. One popular method is to use ETFs. Alternatively, traders can short China stocks listed on the Hong Kong stock exchange. Nearly a third of shares traded in China Overseas Land & Investment (0688:HK), the mainland’s largest developer by market value, were on the short side in August and September said Reuters.
