Chinese stocks popular with major fund managers were hit hard by a massive sell-off after the confirmation of President Xi Jinping’s third term in power, pointing to billions of dollars in losses for those who stuck to their investment portfolios.
The Nasdaq Golden Dragon, which tracks US-listed stocks of Chinese companies, fell 14.4 percent on Monday in its biggest one-day drop ever, taking its decline to nearly 50 percent this year. Shares such as Alibaba, JD.com and Pinduoduo fell.
Hong Kong’s benchmark Hang Seng index suffered its biggest one-day decline since November 2008 on Monday. It fell as much as 1.6 percent in early trading on Tuesday, while China’s CSI 300 index fell as much as 1 percent, before paring their losses.
Chase Coleman’s hedge fund Tiger Global, Edinburgh-based investment group Baillie Gifford and a group linked to Berkshire Hathaway Vice President Charlie Munger are among the investors with large holdings of Chinese stocks.
JD.com ranked first in Tiger Global’s public equity portfolio as of June 30, according to the latest available regulatory filings. The Beijing-based logistics group closed down more than 13 percent on Monday.
More than 30 million Tiger shares in JD.com were worth about $2 billion as of June 30, a share that – if maintained – would lose more than $800 million in value since then, including a drop of 168 million dollars on Monday alone.
The New York-based hedge fund has boosted some Chinese investment this year, adding jobs site Kanzon and electric car maker Lee Auto to the top 10 positions in its public equity portfolio mid-year. Kanzhun shares are down 23 percent and Li Auto shares are down 17 percent on Monday. Tiger declined to comment.
China’s growth rate was well below Beijing’s annual target of 5.5 percent in the third quarter, according to data released on Monday, while Xi secured an unprecedented third term as party leader. The news has raised concerns about the future of the country’s big tech groups after a regulatory crackdown on the sector under Xi.
Tiger presented China as a market that outperformed high-value US technology stocks.
“While China remains unfavorable to most investors, our long contracts in China are down less year-to-date than their US counterparts,” the hedge fund wrote to investors in an August 3 letter seen by the Financial Times. . The company’s flagship hedge fund of $17 billion at the time was down more than 50 percent.
Baillie Gifford has also bet heavily on Chinese stocks. Among the top 10 holdings as of September 30 were shopping platform Meituan and social media and gaming group Tencent, both of which fell more than 14 percent on Monday.
“It was a mistake to reduce our holdings in Western platform companies rather than their Chinese counterparts,” Tom Slater, manager of the £14.2 billion fund, told the Financial Times in May.
Some prominent investors remained bullish on Alibaba even after Chinese authorities halted the planned listing of its fintech arm Ant Group in 2020. Since then, Alibaba’s shares have fallen nearly 80 percent, attracting deal-hunting investors.
Munger helped direct an investment in Alibaba by the Daily Journal, the Los Angeles-based newspaper chain where he serves as director and former president, focusing on the company’s $342 million stock portfolio.
Alibaba’s stake was valued at more than $70 million after the Daily Journal bought more than 600,000 shares at the end of last year. By September 30, it had reduced its stake to 300,000 shares worth about $24 million, according to filings.
In recent quarters, the Daily Journal has borrowed on the sidelines to invest in a stock portfolio that also includes stakes in Bank of America, Wells Fargo and South Korean steelmaker POSCO, according to public disclosures and comments made by Munger at the Daily Journal’s annual meeting in February 2022.
“China is a big, modern country. It has a huge population, and there is a huge modernity that has emerged in the past 30 years,” Munger said at the meeting.
“[We] Invest some money in China because we can get more value in terms of the strength of the institution over the price of the security than we can get in the United States.
Billy Gifford and The Daily Journal did not immediately respond to requests for comment. Munger declined to comment.
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