Ray Dalio’s Bridgewater cut 10 Chinese stocks including Xpeng, TSMC amid third-quarter exodus by hedge funds
- Bridgewater, the world’s largest hedge fund, has scaled back its positions in Chinese companies, shrinking its holdings by 60 per cent since September 2022
- Dalio expects a ‘more behind-the-scenes, Cold War-style great power conflict’ between China and US
Bridgewater, the world’s biggest hedge fund, trimmed its holdings of US-listed Chinese stocks during the three months ending on September 30 by completely getting out of 10 stocks, including electric vehicle (EV) makers Xpeng and Li Auto and biopharma players HutchMed and BeiGene, according to its latest 13F filing overnight in New York.
The money manager, founded by China bull Ray Dalio, also reduced its depositary shares in 16 other stocks, including EV maker Nio, Pinduoduo e-commerce platform owner PDD Holdings, online lender Lufax Holdings, fast-food chain Yum China, hotel operator H Group and travel operator Trip.com.
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The hedge fund’s pullback in New York extends its retreat from China, which started in June last year as returns sagged. The US Federal Reserve tightened while China eased policies without resorting to a stimulus “bazooka”. The MSCI China Index fell 3 per cent in the third quarter, while the Nasdaq Golden Dragon Index advanced 1.6 per cent.
Global funds pulled US$10.9 billion from China’s onshore market in the third quarter, and have withdrawn another US$6.2 billion since September 30, Goldman Sachs said citing Stock Connect data. Between June 30 and September 30, global hedge funds cut their net allocation in China to 8.1 per cent from 8.7 per cent, it added.
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Reports over the past month have shown that manufacturing in China unexpectedly shrank and credit growth was underwhelming, while the country’s housing slump persisted.
Bridgewater held stakes in 19 companies valued at US$525 million on September 30 versus 29 stocks worth US$474 million on June 30, its 13F filings shows, driven mainly by a 41 per cent surge – or a US$76.8 million gain – in PDD on Nasdaq. The value of its China bets, however, has shrunk 60 per cent from a year ago.
Chinese companies make up part of the hedge fund’s 13F portfolio of 740 global companies valued at US$16.5 billion. The Connecticut-based firm managed about US$197 billion at the end of March, according to its regulatory filing.
Meanwhile, Bridgewater increased its iSHARE China Large-Cap ETF and iShares MSCI China ETF during the September quarter, according to its filing, raising its positions in the two exchange-traded funds since 2019 to the highest levels in two years. They track big-cap equities listed in Hong Kong and the MSCI China Index, respectively.
After stepping down in October last year, Dalio became the chief investment officer-mentor at the firm he founded in 1975. In his latest commentary on China, Dalio said in the conflict between Washington and Beijing is changing in an important way that reduces the odds of a military war.
“This new type of ‘war’ will remain very intense and threatening,” he said in a LinkedIn post on Tuesday. “We should expect to see a more behind-the-scenes, Cold War-style great power conflict.”
