China-focused hedge fund performance juiced by stimulus, says Goldman Sachs

By Nell Mackenzie

LONDON (Reuters) - Hedge funds trading China stocks saw gains this week after China's central bank unveiled its biggest stimulus since the 2020 COVID pandemic, a note from Goldman Sachs prime brokerage showed.

China stock picking hedge funds have posted a 1.7% return so far this week to Wednesday, bringing the funds' September performance to 3.2% and year-to-date returns up to an estimated 7.5%, Goldman Sachs said in a note sent to clients on Wednesday and seen by Reuters on Thursday.

After the policy easing measures announced on Tuesday, Goldman Sachs' prime brokerage saw its largest single day buying spree since March 2021, and the second highest on record, said the bank.

Hedge funds mostly bought single stocks across several sectors including consumer products, industrials, tech and materials, the bank note said.

Though hedge fund stock exposure to China this week jumped sharply, it's still below historical records and hovering near five-year lows compared with higher levels at the start of 2023 and 2020, bank data showed.

China-focused hedge funds have struggled in recent years, as growth prospects in the world's No.2 economy dimmed. August economic data broadly missed expectations, adding urgency for policymakers to roll out more support.

Investment banks including Goldman Sachs, UBS and Bank of America recently cut their 2024 China growth forecasts.

Hedge fund investors in a recent Bank of America survey said their allocations to China-focused hedge funds were down, including in the United States where allocators surveyed said their China focused hedge fund investments fell as much as 15% this year.



On Tuesday, hedge funds trading stocks in the wider Asia region also posted a 1.1% uptick, bringing their monthly performance to 2.4% and their year to date returns to 9.3%, said the Goldman Sachs note from Wednesday.

In August, hedge funds trading stocks in the wider Asia region returned a negative 0.4% but were still up 9.2% for the year, said another note by Goldman Sachs, released earlier this month.

Source: Investing.com