New | Top China hedge fund bets on housing rebound

The top-performing China hedge fund is piling back into property shares, reviving a trade that propelled it to a 46 per cent gain in the second half of last year.

Marco Polo Pure Asset Management has been buying developers, including Poly Real Estate Group and Beijing Capital Development, after the industry's benchmark gauge in Shanghai dropped as much as 19 per cent from this year's high.

That same trade helped drive the fund's gain last year as the mainland's interest rate cut in November sent the Shanghai Properties Index on a 60 per cent surge to January 5, said Marco Polo's chief executive Aaron Boesky.

He said the reduction in borrowing costs was just the start of a round of monetary easing that would send the Shanghai Composite Index up about 50 per cent this year. Property stocks led the index's 53 per cent rally last year as investors in the US$5.1 trillion market bet central bank stimulus would boost the world's second-largest economy from its weakest expansion since 1990.

"We are going to make a new high," said Boesky, whose Pure China fund was the top performer in the second half among China-focused hedge funds tracked by AsiaHedge Intelligence, adding the central government was "going to start making cost of capital cheaper and the economy faster".

However, John-Paul Smith, the founder of Ecstrat, a London-based research firm, said equity investors counting on the mainland's monetary stimulus to drive gains were likely to be disappointed as the economy weakened further.

Mainland imports plunged last month by the most in more than five years, a sign of weakening domestic demand, while gauges of manufacturing and services industries fell.