Goldman Sachs Group Inc.’s hedge fund clients net bought Chinese stocks at the fastest pace in nine months on Tuesday, bolstered by recent government support policies, the Wall Street bank said in a note on Wednesday.
(Bloomberg) — Goldman Sachs Group Inc.’s hedge fund clients net bought Chinese stocks at the fastest pace in nine months on Tuesday, bolstered by recent government support policies, the Wall Street bank said in a note on Wednesday.
Hedge fund long-buys outweighed short covers for Chinese equities by a ratio of 3.5 to 1 on July 25. It was led by purchases of yuan-denominated A-shares listed in mainland China, followed by Chinese stocks listed in Hong Kong. The buying was muted for American depository receipts, according to a note from Goldman’s prime brokerage team.
The Chinese Communist Party’s Politburo laid out a pro-growth tone at its key economic meeting this week, raising expectations that Beijing will keep cutting interest rates, speed up the issuance of infrastructure bonds and loosen property policies to rejuvenate the economy. In July, the government also signaled the end of a multi-year crackdown on its increasingly powerful private technology companies.
For Chinese equities, hedge funds net bought nine out of 11 industries tracked by Goldman Sachs, with the exception of health care and utilities. The purchases were led by stocks in consumer discretionary, staples, financials, materials and industrials.
Despite the large net buying on Tuesday, bearishness remained. The hedge funds’ gross and net exposures to Chinese stocks, as a percentage of the bank’s global prime book, hovered at the lowest levels since November, the note said.
Gross exposure measures the combination of bullish and bearish bets, while net exposure is the difference between the dollar value of longs and shorts. The ratio of their bullish versus bearish bets on Chinese equities stood at around 2.39, about the lowest since December.
Chinese stocks have surged this week following the government’s latest pledges. A gauge of the nation’s tech shares traded in Hong Kong headed for a technical bull market on Thursday.
Still, sentiment remains fragile as Beijing has repeatedly fallen short of expectations for stronger economic stimulus and investors have stressed that follow-through and implementation of policy promises is a must to sustain the nascent rebound.
The broader Hang Seng China Enterprises Index, which tracks major Chinese companies listed in Hong Kong, is down about 1% so far this year as the uncertainty has seen investors sell into intermittent market rallies. The gauge slumped 19% in 2022, capping a third straight year of losses, the longest on record.
–With assistance from Shikhar Balwani.
(Updates with markets in the last three paragraphs)
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