Bridgewater continues to cut US-listed Chinese stocks as Singapore’s Temasek, Saudi’s PIF stay the course for market turnaround

Bridgewater trimmed more positions US-listed Chinese stocks in the final quarter of 2023, including a total exit from Miniso and Noah Holdings
Temasek has retained most of its US-listed shares, but sold all of its US$42 million stake in an exchange-traded fund tracking Chinese tech firms

China stock market

Jiaxing Li

Published: 4:04pm, 15 Feb 2024

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China’s stock market prospects continue to divide global money managers after reports showed hedge funds pared their bets last quarter while state investment funds from Singapore to Saudi Arabia retained their holdings in the hope of an end to a trillion-dollar market rout.

Bridgewater Associates sold all of its stakes in low-cost retailer Miniso and wealth manager Noah Holdings last quarter, according to its latest regulatory filing in New York on Wednesday. It also trimmed its positions in Chinese equities, including PDD Holdings, Trip.com and Yum China, by 10 to 20 per cent.

The hedge fund had earlier joined a global exodus by pruning its bets on Chinese companies in the third quarter as losses deepened, by getting out of 10 stocks including electric-car makers Xpeng and Li Auto and biopharma players HutchMed and BeiGene.

Bridgewater, the world’s biggest hedge fund with US$197 billion of assets, held US-listed depositary shares in 18 Chinese companies valued at US$578 million on December 31, compared with holdings in 45 firms worth US$1 billion a year earlier, according to filings.

“The economy has been too weak and deflation is the last thing that they need, because it makes debt problems worse,” Bob Prince, Bridgewater’s co-investment chief, said at the Asia Financial Forum in Hong Kong last month. “It hurts corporate profitability and sentiment” and policy intervention is needed to achieve equilibrium, he added.

The MSCI China Index, which tracks more than 700 companies traded at home and abroad, slumped 4.5 per cent in the three months ended December, bringing the decline in 2023 to 11 per cent. It was the market’s worst losing streak in two decades, after annual losses of about 22 per cent in 2022 and 2021.

Investors want Beijing to do more to keep the US$380 billion stock rally going

Beijing has since intensified its efforts to halt the slump, with its US$1.24 trillion sovereign wealth fund China Investment Corp disclosing its intervention in the market earlier this month. The nation’s securities regulator has also moved to curb securities lending and “vicious short selling” to put a floor under the sell-off.

That may have benefited state-owned investment vehicles like Singapore’s Temasek Holdings and Saudi Arabia’s Public Investment Fund (PIF), after both of them retained most of their Chinese stock holdings last quarter.

Temasek maintained its bets on eight Chinese firms including Alibaba Group, JD.com and Yum China, its latest 13F filing showed. Still, it divested a US$42 million position in the KraneShares CSI China Internet ETF, an exchange-traded fund that tracks US and Hong Kong-listed tech leaders such as Alibaba, the owner of this newspaper.

Similarly, PIF kept its positions in PDD Holdings, Alibaba and BeiGene last quarter, pausing after raising its bets in preceding quarters, the filing showed.

Michael Burry, who profited from shorting the US housing market in 2007-08, added to wagers on e-commerce leaders Alibaba Group and JD.com in recent months. His firm Scion Asset Management made Alibaba its top holding after boosting its stake by 50 per cent in the December quarter, Bloomberg reported.

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However, Asian fund managers remained hesitant about chasing Chinese stocks despite measures by Beijing to halt the market downturn and restore investor confidence, Bank of America said in a report on February 13, based on a February 2-8 survey of people managing US$331 billion of assets.

More survey participants expected a weakening rather than a strengthening in the year ahead for the first time since the periodical survey began 17 months ago, the US bank said. The majority of them were willing to sit out or avoid the market, including 15 per cent who were looking to cut risk on any bounces, the report added.

Fund allocations for Chinese equities sank to a record low of net 23 per cent underweight, the survey showed. There was overwhelming demand for monetary policy easing but a concerted action has been lacking, the survey noted.

“There’s a latent need for policy sponsorship [in China] to be stimulative, and then the only question is when’s that going to happen and what form will it take,” Bridgewater’s Prince said. “They probably need more.”

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