Hedge funds fuel record weekly buying of Chinese shares on stimulus Reuters

By Summer Zhen

HONG KONG (Reuters) – Global hedge funds rallied to Chinese shares amid much stronger than expected stimulus measures in Beijing, leading to the strongest weekly buying on record, a Goldman Sachs note showed.

Hedge funds “grossly” accelerated their allocation to the world’s second-largest economy, with purchases of Chinese stocks in the week of September 23-27 hitting the highest level since Goldman Sachs’ records began in 2016.

The flow was led by long positions, particularly in single stocks, with buying focused on consumer, industrials, financials and information technology, the bank’s prime brokerage team said in a report this week.

Energy was the only sector marginally sold by hedge funds, according to the bank.

Chinese stocks rebounded and enjoyed their best weekly gain in more than a decade after the government announced a sweeping stimulus package that includes interest rate cuts and a $114 billion war chest to boost prices actions.

The market frenzy continued this week as top cities rushed to lift restrictions on home purchases over the weekend.

The CSI 300 benchmarks surpassed their biggest one-day gains since 2008 on Monday.

The surge helped stock-pick hedge funds focused on China post a 6 percent return last week, their best weekly performance recorded by Goldman Sachs. So far this year, these hedge funds are estimated to have earned 12.8%.

While underweighting Chinese stocks was the biggest consensus trade in the past few years amid a bleak economic outlook and geopolitical tensions, the tide is turning, investors and analysts say.

Not just hedge funds or speculators, many long-term foreign investors now fear missing out.

According to LSEG Lipper data, foreign exchange-traded funds (ETFs) that focus on Chinese stocks saw inflows of $2.4 billion in the last three trading sessions in September, a stark contrast to outflows of $2.7 billion from the beginning of the year until September. 25.

“We have seen a substantial increase in buying interest in Chinese stocks on the National Day holiday. This is encouraging and suggests a potential shift in global investor sentiment towards China after a long period of outflows,” said Wee Khoon Chong, chief markets strategist. for APAC at BNY, whose custodial service tracks $49.8 trillion in assets.

Foreign long-term investors have shown a significant reversal in sentiment, with strong buying since Thursday, Chong added.