Hedge funds are dumping Chinese stocks aggressively as growth expectations decline

NEW YORK (Reuters) – A report by Goldman Sachs on Tuesday showed that global hedge funds were selling Chinese stocks “aggressively” amid growing concerns about the country’s real estate sector and a weak set of economic data.

All kinds of shares were sold, but “A” shares, which are listed on the local stock market, led the selling, which accounted for 60% of them, the bank said.

“Hedge funds have net sold Chinese equities in eight of the last 10 sessions in the head book through 8/14,” it said, adding that its clients had dumped their long and short positions.

This is the largest net sell-off in Chinese stocks over any 10-day period since October 2022 and one of the highest moves in the past five years.

Goldman Sachs, as one of the largest providers of lending and trading services through its main brokerage unit to investors, is able to track investment trends in hedge funds.

Global investors have raised concerns about the Chinese economy as a confluence of recent events has clouded the economic outlook for China.

On Tuesday, a wide range of Chinese economic data highlighted intensifying pressure on the economy from several fronts, prompting Beijing to cut key interest rates to support activity.

Chinese real estate giant Country Garden (2007.HK) is seeking to defer repayments on private domestic bonds, and a major Chinese trust that has traditionally had large exposure to real estate, Zhongrong International Trust Co, has missed some repayment obligations.

Hedge funds are increasingly wary of their exposure to China. A group of US-based hedge funds, including Koto, D1 Capital and Tiger Global, cut positions in Chinese stocks in the second quarter, securities filings showed Monday, as the country’s economic outlook already looked volatile and geopolitical tension heightened.

Covering by Carolina Mandel in New York; Editing by Sonali Paul

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