The latest reports on China’s stock market have highlighted the divergent strategies of hedge funds and state investment funds. While hedge funds such as Bridgewater Associates have reduced their bets, state-owned investment vehicles like Singapore’s Temasek Holdings and Saudi Arabia’s Public Investment Fund (PIF) have held on to their Chinese stock holdings. This indicates a cautious optimism among state investors that the market rout will eventually come to an end.
Despite the market downturn, Beijing has taken measures to restore investor confidence and halt the slump in the stock market. The $1.24 trillion sovereign wealth fund China Investment Corp has intervened in the market, and the securities regulator has moved to curb securities lending and “vicious short selling” to put a floor under the sell-off.
However, Asian fund managers remain hesitant about chasing Chinese stocks, according to a recent report by Bank of America. More participants expected a weakening rather than a strengthening in the year ahead. Nonetheless, there is a latent need for policy sponsorship in China to be stimulative, and the majority of fund managers surveyed expressed overwhelming demand for monetary policy easing.
Overall, while the situation in China’s stock market remains complex, there are signs of cautious optimism among some state investors, and Beijing has taken steps to restore investor confidence. The demand for monetary policy easing is also indicative of a desire for further action to be taken to stabilize the market.
(Source: SCMP)
