Star Hedge Fund Calls China Stocks Bottom, Says Time to Buy

A top-performing Chinese macro hedge fund predicts a bull market in the near future.

Net-long positions in the mainland A-share market have been rebuilt to 40% as of the end of last month, according to the investor letter. The firm had kept their exposure low.

In a letter dated Oct. 10, the company wrote that they were no longer pessimistic on A-shares. There is a good chance that we will gradually buy the dip and long A- shares.

As the government steps up efforts to bolster growth and arrest a property crisis, Li is adding to growing optimism among peers. According to a survey by Shenzhen PaiPaiWang Investment & Management Co., about 70% of hedge funds say that stocks have fully priced in all negative factors and the benchmark index has bottomed out at around 3000.

According to Banxia, corporate profits probably hit a low in the third quarter, property sales could rebound as soon as next month as regional policies become clear, and covid restrictions could possibly be loosened after the Communist Party Congress this month. China's economic growth could rebound after October due to those factors.

Li built long positions to as much as 65% before he cut back. The Banxia Stable Fund was the top ranked fund in 2020.

Li didn't say anything about the letter. According to the document, her lower-volatility Banxia Macro Fund lost 3% this year. The index fell in the first nine months.

The market correction could have been much worse, according to a manager whose fund raised more than 10 billion dollars in three months.

The economy, market environment and policy support are better now that the stock indexes are close to lows.

New energy, high-end equipment and technology innovation bellwether firms make up the majority of United Advance's holdings. The team locked in a bunch of stocks at valuation levels that have strong prospects according to the letter. The company didn't say anything.

A macro fund that started buying stocks in sectors such as oil, shipping and medical equipment last month after cutting equities to zero at the end of June is also shared by Banxia. The flagship fund jumped 65% this year through Sept. 30 Bank clients have a bond portfolio of 5 billion dollars.

The property market, which has been a drag on growth, is set to see marginal improvements as local authorities step up support, according to the president. He said that China's policy of conducting regular covid tests is able to keep the virus in check without resorting to large-scale lockdowns.

A weak economic recovery is certain even in a worst-case scenario, according toZhang. There could be a V-shaped rebound in the market if the covid curbs are loosened significantly.

The People's Daily reiterates the importance of maintaining Covid Zero and property sales are still falling. In the PaiPaiWang survey, only 21% of funds said a rebound is on the way, while over 70% of respondents said the market will stay the same.

Banxia made a note of caution for the time being. The company is using derivatives to increase exposure and is capping net-long positions at 60%. The letter states that it will only add stocks when the rebound takes shape.

The company didn't short stocks because they knew the decline was over. There will be a new bull market in the future.

The assistance was given by JohnLiu and Dingmin.