Hedge funds dump Chinese stocks aggressively as growth outlook dims

A worker looks on at a construction site of residential buildings by Chinese developer Country Garden, in Beijing, China Aug 11, 2023. REUTERS/Tingshu Wang/File photo

NEW YORK  -Global hedge funds are “aggressively” selling Chinese stocks amid heightened concerns over the country’s property sector and a weak batch of economic data, a Goldman Sachs report on Tuesday showed.

All types of stocks were sold, but A-shares, those listed in the domestic stock market, led the sell-off, comprising 60 percent of it, the bank said.

“Hedge funds have net sold Chinese stocks in eight of the last 10 sessions on the prime book through 8/14,” it said, adding its clients divested both their long and short positions.

This is the largest net selling in Chinese equities over any 10-day period since Oct 2022 and one the highest moves in the past five years.

Goldman Sachs, as one of the biggest providers of lending and trading services through its prime brokerage unit to investors, is able to track hedge funds‘ investment trends.

Global investors have raised concerns about China’s economy as a confluence of recent events has darkened its economic outlook.

On Tuesday, a broad array of Chinese economic data highlighted intensifying pressure on the economy from multiple fronts, prompting Beijing to cut key policy rates to shore up activity.

Chinese property giant Country Garden is seeking to delay payment on a private onshore bond and a major Chinese trust company that traditionally had sizable exposure to real estate, Zhongrong International Trust Co, has missed some repayment obligations.

Hedge funds are increasingly wary of their exposure to China. A raft of U.S.-based hedge funds, including Coatue, D1 Capital and Tiger Global, cut their positions in Chinese stocks in the second quarter, as the country’s economic prospects already seemed to wobble and geopolitical tension increased, securities filings showed on Monday