CHINA: Hedge funds boost China stock purchases as government lays out growth plans

As published on: hedgeweek.com, Friday 28 July, 2023.

Hedge funds' net purchases of Chinese stocks accelerated to the highest pace seen in nine months this week as the government revealed plans to stimulate economic growth in the world's second largest economy, according to a report by Bloomberg.

The report cites data from Goldman Sachs prime brokerage business as revealing that on 25 July, hedge fund client long-buys outweighed short covers for Chinese equities by a ratio of 3.5-to-one, led by purchases of yuan-denominated A-shares listed in mainland China, and Chinese stocks listed in Hong Kong. 

Nine out of the 11 industry sectors tracked by Goldman Sachs saw net purchases by hedge funds – the exceptions being health care and utilities – with consumer discretionary, staples, financials, materials and industrials stocks proving the most popular.

The buying spree came as the Chinese government laid out pro-growth plans at a key economic meeting this week, raising expectations that Beijing will look to rejuvenate the country's flagging economy with further interest rate cuts, and by speeding up the issuance of infrastructure bonds, and loosening property policies. 

Despite this week's increase in net buying though, hedge funds' gross and net exposures to Chinese stocks, as a percentage of Goldman's global prime book, remain around the lowest level seen since November, according to a note from the bank.


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