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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Global Hedge Funds Bet Big On Chinese Stocks After Major Stimulus

Global hedge funds are diving into Chinese stocks, spurred by Beijing’s massive stimulus measures – leading to the best weekly gains for Chinese equities in over a decade.

Hedge Source: Finimize

What Does This Mean?

During the week of September 23-27, hedge funds significantly increased their Chinese stock investments following Beijing’s expansive stimulus package. According to Goldman Sachs, hedge funds’ allocation to Chinese equities that week was the highest since records began in 2016.

  • Targeted Investments: Long positions in single stocks across sectors like consumer goods, industrials, financials, and technology.
  • Sales: Minor sales were seen only in the energy sector.

Market Impact

Chinese stocks saw their best weekly gain in over ten years, driven by:

  • Interest Rate Cuts
  • A $114 billion fund to lift share prices.
  • First-tier cities lifting home purchase restrictions.

Both the CSI 300 and Shanghai Composite indices experienced their biggest single-day gains since 2008.

Why Should I Care?

For Markets: Chinese stocks on the rise.

The substantial increase in investments drove China-focused stock-picking hedge funds to a 6% return last week, their best on Goldman Sachs' record. Year-to-date gains for these funds now stand at 12.8%.

Beyond hedge funds, foreign long-term investors also upped their positions, fearing they might miss out on the rally. According to LSEG Lipper data:

  • $2.4 billion inflows to foreign equity ETFs focusing on Chinese stocks in the last three trading days of September.
  • This marks a sharp contrast to the $2.7 billion outflows earlier this year.
  • The Bigger Picture: A shift in global sentiment.

Ahead of the National Day holiday, a notable uptick in buying interest in Chinese stocks indicated a potential global sentiment shift. A senior markets strategist for APAC at BNY Mellon highlighted the renewed investor confidence.

With Beijing's broad stimulus measures driving a remarkable stock market recovery, the major index gains suggest global investors are identifying new opportunities in China. This reflects a broader optimism about the country's economic future.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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