Global hedge funds have increased their holdings of Chinese equities for the fourth consecutive week, joining a wave of investors anticipating a market rebound.

Hedge Funds Boost Chinese Equity Holdings Amid Market Rebound


blog post cover photo

Image credit: Austin Distel

Global hedge funds have increased their holdings of Chinese equities for the fourth consecutive week, joining a wave of investors anticipating a market rebound.

The recently underperforming stocks in the world's second-largest economy have been rallying since February as Beijing has ramped up measures to address economic challenges and as macroeconomic data has shown signs of recovery.

Hedge funds have purchased Chinese stocks in seven out of the past eight weeks, according to a note from Goldman Sachs' prime brokerage team, as reported by Reuters on Tuesday. The report did not disclose the total amount of these purchases.

China's markets have unexpectedly outperformed major global markets so far this year, with Hong Kong's Hang Seng Index up by a third from its lowest point in January. The MSCI China index has risen 16% year-to-date.

On Monday, Goldman Sachs raised the price targets for both MSCI China and China's blue-chip CSI 300 Index.

Some hedge fund investors are betting on the rally by buying call options, aiming to capitalize on bigger gains from the rise in stocks, according to a separate note from Goldman Sachs.

"The combination of decade-low allocations to China from both hedge- and long-only mandates and the blistering pace of the recovery has caught investors off-guard in the past months," analysts led by Kinger Lau wrote.

"The resulting performance pressures may have incentivized investors to close underweight gaps or raise exposures in Chinese stocks, likely reinforcing and fueling the upturn as the positive spiral takes hold."

In its most recent moves to restore market confidence, China last week initiated 1 trillion yuan ($138 billion) in stimulus bond issues and unveiled a series of measures to support the country's struggling housing market.

Yet not all investors are convinced by the recovery narrative.

CTA: To gain further insights into a company's true profitability and compare it with competitors, explore the Owner Earnings API: Link

Other Blogs

Nov 25, 2023 6:39 AM - Parth Sanghvi

DCF Valuation vs. Comparable Companies Analysis: Choosing the Right Valuation Method

Choosing the Right Valuation Method: DCF vs. Comparable Companies Analysis Introduction: Valuation methods play a pivotal role in determining the fair value of a company, aiding investors in making informed investment decisions. Two commonly used methods, DCF Valuation and Comparable Companies A...

blog post title

Dec 23, 2023 2:19 AM - Parth Sanghvi

Understanding the Limitations of DCF Analysis: A Guide to Overcoming Challenges

Introduction: Discounted Cash Flow (DCF) analysis stands as a cornerstone in valuing investments, yet its efficacy is contingent upon various assumptions and methodologies. While a powerful tool, DCF analysis comes with inherent limitations and challenges that investors must acknowledge to make i...

blog post title

Dec 25, 2023 2:28 AM - Parth Sanghvi

Integrating Sustainability into Valuations: Navigating ESG Factors within the Discounted Cash Flow (DCF) Model

Introduction: The investment landscape is undergoing a profound shift with a heightened emphasis on sustainability and responsible investing. In this blog post, we explore the intersection of Environmental, Social, and Governance (ESG) considerations within the Discounted Cash Flow (DCF) model, h...

blog post title


Financial Modeling Prep API provides real time stock price, company financial statements, major index prices, stock historical data, forex real time rate and cryptocurrencies. Financial Modeling Prep stock price API is in real time, the company reports can be found in quarter or annual format, and goes back 30 years in history.
2017-2024 © Financial Modeling Prep