Hedge funds upped their acquisitions of Chinese stocks to the fastest pace seen in over five years during a three-day period last week, according to a report by Reuters which cites a client note from Goldman Sachs.
Cumulative net buying of Chinese equities from 23 to 25 January marked the biggest three-day shopping spree in more than five years, according to the note. Almost $12bn went towards Chinese equity funds in the week to Wednesday — the largest inflow since 2015 and the second-largest ever — according to Goldman Sachs and a separate note from Bank of America, both citing EPFR data.
Many of the actions taken by hedge funds last week were outright long positions rather than exiting short positions. The most common strategy saw hedge funds snapping up US-listed shares of overseas companies, or American Depository Receipts (ADRs), followed by mainland A-shares and H-shares (Chinese companies listed in Hong Kong), in order to access Chinese equities.
The surge in interest contrasts with a recent eight-week period of bearish bets on China’s falling stock prices and coincides with Beijing’s efforts to restore confidence in the world’s second-biggest economy, which has been hit by a crisis in the property sector and weak growth.
Despite this record inflow, Goldman Sachs further noted that overall positioning in Chinese equities remains at five-year lows across both hedge funds and mutual funds. The latter’s historical holdings sat at a 5.5% allocation to China as of the end of December — the lowest level over the past decade.
