Hedge funds focused on China experienced remarkable returns in September, driven by a sharp rebound in Chinese equities following Beijing’s aggressive stimulus measures.
Impressive Returns Boost Asia’s Hedge Fund Performance
The surge in China’s blue-chip CSI 300 Index, which saw a record 25% jump over five days last week, propelled Asian equity hedge funds to the top of global performers this year. Hong Kong-based Triata Capital posted a staggering 44% return in September, bringing its year-to-date performance to 56%. The $770 million fund’s long-term investments in data centers, internet giants, and travel firms paid off handsomely during the rally.
Similarly, Yunqi Capital’s China Fund gained 26% before fees, fueled by bets on beaten-down Chinese internet and fintech companies like Lufax Holdings and Qifu Technology.
China’s Stimulus Package Sparks Market Recovery
The rally followed China’s largest post-pandemic stimulus package, including interest rate cuts and a $114 billion boost to support share prices. This has reversed the decline in Chinese equities, which had been weighed down for three years by a sluggish economy and geopolitical tensions.
The MSCI China Index rose 24% in September, marking its best monthly gain since November 2022. Analysts expect overseas investors to return if the rally continues and the economy stabilizes.
Mixed Results for Hedge Funds with Different Strategies
While funds with heavy exposure to Chinese stocks thrived, those with lower net long positions underperformed. Singapore-based Keystone Investors, which uses a long-short strategy, lost 4.8% in September but still posted a 13.2% year-to-date gain. Short sellers of offshore Chinese stocks were estimated to have incurred losses of $6.9 billion in the last two weeks of the month.
China-focused hedge funds are now riding high, but the sustainability of this rally will depend on continued economic recovery and the impact of further government measures.
