Bridgewater Associates sold more US-listed Chinese stocks from its global portfolio last quarter as returns sagged, bringing its retreat from some of the mainland’s underperforming companies to about 80 per cent over the past two years.
The US investor cut all its stakes in social-media platform operators Weibo and Joyy, as well as solar-panel maker Daqo New Energy, during the three months to June 30, according to its latest 13F filing in New York on Thursday.
The world’s biggest hedge fund, founded by billionaire China bull Ray Dalio, also slashed its holdings in car maker Li Auto, KFC and PizzaHut restaurant chain operator Yum China, as well as online travel agency Trip.com, by as much as 45 per cent, the filing showed.
The retreat shows how far Chinese stocks have gone out of favour as peers in the US and other emerging markets rallied. MSCI China, the broadest gauge of Chinese stocks, rose 1.7 per cent over the past seven quarters, while benchmark indices in the US, Japan and India surged by 34 to 52 per cent, according to Bloomberg data.
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Why investors can expect more market volatility after recent global stock sell-off
Why investors can expect more market volatility after recent global stock sell-off
China’s gross domestic product grew at an annual pace of 4.7 per cent last quarter, easing from 5.3 per cent in the preceding three months. A prolonged property market slump and price deflation have dogged the economy in the post-Covid years, adding to geopolitical tensions in the region and with the US.
In total, the number of companies in Bridgewater’s global stock portfolio jumped to 877 from 677, valued at US$19.2 billion, according to the 13F filing. They included 14 Chinese companies, whose market value shrank by 14.5 per cent last quarter to US$266 million.
The hedge fund, which had US$172 billion of assets on March 31, has now reduced its holding in US-listed Chinese stocks by 80 per cent since the third quarter of 2022, when it left its China exposure largely unchanged.
In other portfolio adjustments, Bridgewater also reduced its stakes in China-focused exchange-traded funds last quarter. The hedge fund cut its holding in iShare China Large-Cap ETF by 11 per cent and iShares MSCI China ETF by 10 per cent.
Bridgewater might have taken advantage of a market rebound earlier this year to sell. The MSCI China Index, which tracks 655 Chinese companies listed at home and abroad, surged almost 20 per cent from April to May, after Beijing stepped up policy support and investors moved funds away from overpriced markets.
Despite the retreat, portfolio diversification into the world’s second largest economy is still “desirable” as Chinese assets are “attractively priced”, Dalio said at the Greenwich Economic Forum in Hong Kong in June. China and the US are in risky positions amid their elevated debt burden and diversification is “more important than ever,” he said in a separate email to the Post.
Dalio relinquished control of Bridgewater in October 2022, after stepping down as CEO in 2017 and chairman in 2021. His current role involves mentoring the committee that has oversight over the firm’s investment strategies.
Foreign institutional investment into China A-shares has plummeted since its 2021 peak of US$67.2 billion, with inflows dwindling to US$13.3 billion in 2022 and US$8.1 billion in 2023. The trend has continued into this year, with a net outflow of US$200 million through last week, according to data compiled by Goldman Sachs.
Bridgewater is not alone in pulling more money out of Chinese stocks.
Fenghe Fund Management, a Singapore-based hedge fund co-founded by Alibaba Group Holding’s chief technology officer, also threw in the towel. His fund exited from TAL Education, Alibaba Group and Yum China last quarter in one of its most aggressive cuts, according to its 13F filings.
Alibaba is the owner of the South China Morning Post.
