Global hedge funds increased their holdings of Chinese stocks for the fourth week in a row, joining a large number of investors trying to catch up with the Chinese stock market's rebound.
Global hedge funds increased their holdings of Chinese stocks for the fourth week in a row, joining a large number of investors trying to catch up with the Chinese stock market's rebound.
Since February, as the Chinese government stepped up measures to deal with economic challenges, and macroeconomic data showed signs of recovery, the world's second-largest economy's bumpy stock market has been rebounding.
Goldman Sachs's institutional brokerage team said in a report last Friday that hedge funds have bought Chinese stocks in seven of the past eight weeks. The report did not reveal the amount of the purchase.
So far this year, the Chinese stock market has unexpectedly outperformed major global markets, and the Hang Seng Index has risen one-third from its January low. The MSCI China Index has accumulated a cumulative increase of 16% so far this year.
On Monday, Goldman Sachs also raised the target price of the MSCI China and the Shanghai and Shenzhen 300 Index, raising the 12-month target of the MSCI China Index from 60 to 70; and raised the 12-month target of the Shanghai and Shenzhen 300 Index from 3,900 points to 4,100 points.
Goldman Sachs said in another report on Friday that some hedge fund investors are betting on a rise in the stock market and buying call options to take advantage of the greater benefits brought by the rise in the stock market.
Analysts led by Kinger Lau wrote, “In the past few months, both hedge funds and long fund allocations to China reached their lowest level in 10 years. Coupled with the rapid pace of China's economic recovery, investors were caught off guard.”
“The resulting performance pressure may motivate investors to reduce their holdings gap or increase their exposure to Chinese stocks. As a positive spiral forms, this may strengthen and drive the rise in the stock market.”
In a recent move to restore market confidence, China last week launched 1 trillion yuan (138 billion US dollars) to stimulate bond issuance and announced a series of measures to support the real estate market.
Editor/Jeffrey