Greenwoods Asset Management, one of China’s largest hedge funds with over $20bn in AUM, ramped up its exposure to Hong Kong-listed equities during the recent selloff, as ongoing geopolitical tensions and policy uncertainty erode the appeal of US markets, according to a report yesterday Bloomberg.

The report cites Gao Yuncheng, Managing Partner at Shanghai-based Greenwoods, as revealing in an interview that the firm has significantly reduced its non-China exposure this year, citing Beijing’s consistent policy support in contrast to the “flip-flopping” policy environment in the US.

“The most important thing for a market is the stability and rationality of its policies,” said Gao. “China’s policies have always been supportive, and authorities have stepped up efforts since September.”

Greenwoods’ increased allocations to Hong Kong are largely driven by optimism around China’s technological advancement, its rising domestic consumption, and improving valuations. While Gao declined to name specific positions due to compliance constraints, he emphasised a focus on companies with global competitiveness and robust fundamentals.

One of the firm’s flagship vehicles, the Greenwoods Select Fund, returned 21% in 2024, outperforming onshore benchmarks like the CSI 300 Index (+15%) and closely tracking the Hang Seng China Enterprises Index (+26%). The fund posted a 10.6% return in Q1 2025, according to client materials reviewed by Bloomberg.

Greenwoods’ activity coincides with a surge in southbound capital flows, as mainland investors poured record volumes into Hong Kong stocks on 9 April, underscoring growing domestic appetite for offshore China exposure.

However, the fund’s bullish stance comes at a time of heightened geopolitical risk. The Hang Seng China Enterprises Index has declined over 8% since US President Donald Trump’s 2 April tariff announcement, reducing year-to-date gains to just 7%. Gao though, sees limited risk of a full economic decoupling between China and the US, instead expecting a protracted period of volatility with selective opportunity.

Gao also pointed to China’s AI advancements and the September 2024 stimulus package as catalysts bolstering investor sentiment. “Owning Chinese assets through Hong Kong stocks has become another choice for international investors,” he said, positioning them as a viable alternative to the US tech-heavy ‘Magnificent Seven’.