Top Chinese macro hedge fund Shanghai Banxia Investment Management Center dramatically cut its stock positions last month as the country’s market rout deepened, incurring losses in the process after betting on a rapid economic recovery, according to a report by Bloomberg.
The report cites the firm’s January letter to investors as revealing the significant reduction in equity assets in the middle of last month in a bid to minimise losses. Banxia maintained its exposure to safer, high-dividend stocks and larger companies in the CSI 300 Index.
Writing in the letter, Banxia said the decision allowed the firm to “luckily dodge the more fierce declines of the most recent week”, as Chinese shares plunged to a five-year low on Friday, prompting regulators to tighten trading restrictions on domestic institutional investors as well as some offshore units in a further bid to stem the prolonged rout.
Expectations of more forceful government action to revive the market saw stocks rally on Tuesday.
According to the letter, Banxia has now lowered its risk appetite and will keep its net equity exposure below 35% unless opportunities emerge; this is compared to its target range of as much as 70% last month.
