US hedge funds, including Appaloosa Management and Scion Asset Management, have significantly increased their stakes in US-listed Chinese companies, with e-commerce leader JD.com and data centre operator GDS Holdings among the most sought-after investments, according to a report by Reuters.

The report cites a Goldman Sachs release as highlighting that exposure to Chinese stocks traded on US exchanges, known as American Depository Receipts (ADRs), among US hedge funds has risen to its highest level since late 2021. Goldman Sachs noted that about 25% of US long-short equity funds held positions in at least one Chinese ADR as of the start of the fourth quarter.

JD.com has emerged as a favourite, attracting 47 hedge funds, with a net increase of 26 funds boosting their stakes during the third quarter. GDS Holdings and hotel chain Atour Lifestyle Holdings also saw rising interest, driven by optimism around consumer recovery and artificial intelligence-related growth.

Wall Street’s renewed focus on Chinese stocks came during a brief rally in late September, spurred by China's economic stimulus measures. However, the initial enthusiasm waned as subsequent fiscal policies fell short of expectations and concerns grew over potential US tariffs following Donald Trump’s return to the presidency.