Hedge funds are increasingly placing more bets on Chinese equities as the country ends its tough zero-COVID policy.
According to Goldman Sachs’ prime services weekly report, investors have added more Chinese stocks than they shorted in eight of the past 10 weeks. Chinese equities saw the biggest cumulative four-week net buying since it started tracking the data.
Early in December, China announced sweeping changes to its zero-COVID policy, loosening rules aimed at curbing the spread of the virus. Some investors expect the new approach will spur economic growth. The MSCI China index has gained 13.55% since the start of 2023.
Shares in Chinese companies accounted for 13.1% of the global net exposure of funds tracked by Goldman Sachs as of Jan. 19, up from 7.1% in late October, but still below a peak level of 15.3% in July 2020.
China was “by far the most net bought market on the prime book this week,” Goldman Sachs’ report said, based on its clients’ flows. “China is quickly becoming a consensus long idea, in our view.”
Analysts at JPMorgan, who also see hedge funds adding Chinese stocks to portfolios, warned in a new report that some of the positive momentum may wane in the near term, depending on new developments on China’s reopening measures. “If the China reopening story continues to gather pace and if we see greater participation across investor types, then perhaps the rally can continue.”
-Carolina Mandl and Nell Mackenzie, Reuters
Also see, from The Globe’s Ian McGugan: The trick for making money in Chinese equities is not overstaying your welcome
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Stocks to ponder
Uni-Select Inc. (UNS-T) In 2022, this stock was the ninth-best performing stock in the S&P/TSX Composite Index with a gain of 66 per cent. The share price rallied to a record closing high in December. However, in recent weeks, this positive price momentum has reversed. The company is a distributor of automotive products in Canada and the U.K., and also a distributor of automotive and industrial paint across North America. Is this an opportunistic time to sell or buy shares? Jennifer Dowty looks at the investment case.
The Rundown
Seeking some portfolio stability? These stocks have proven to be inflation-beaters
Rising inflation and interest rates were the main contributors to the woes of the stock markets in 2022. Interest-sensitive securities like REITs, utilities, telecoms, and bonds all tumbled as rates marched steadily higher. But there were some inflation-beaters. These securities thrived in a rising price environment and are still doing well, although momentum is slowing. Gordon Pape takes a look at a number of them.
Why tech stocks rally when companies cut jobs
Alphabet Inc. on Friday announced it will eliminate 12,000 positions, marking the tech giant’s deepest cuts ever and adding to concerns that the swell of layoffs by technology companies over the past several months is signalling gloomy days ahead. So why are Google shares rallying? Evidence suggests that job cuts can be good news for share prices, and today’s environment may be no exception. David Berman tells us more.
Why your dividend stocks could use another look
Canadian investors haven’t had to think too hard about their dividend stocks over the past decade or so. For the bulk of the 2010s, income-oriented funds were more or less interchangeable, rising and falling without much deviation from one another. The steady decline of interest rates and bond yields over that period worked to the benefit of the entire ecosystem of dividend payers. But that’s not the case any longer, as Tim Shufelt reports.
Rate hikes or none, investors needn’t sweat the Bank of Canada
The easing in the inflation rate in December is being seen as a sign the Bank of Canada’s tightening cycle may end soon – with many predicting a final 25-basis-point hike this week. But whether the bank raises rates more or less, sooner or later, investors needn’t fret its decisions, says billionaire investor Ken Fisher. Shift your focus to the robust quantity of actual lending, falling input prices and lower inflation expectations.
The art of spending money - and what it reveals about who you really are
Most of the attention in behavioural finance goes to how people invest. But this thought-provoking piece by Morgan Housel shows just how much deeper the psychology of spending money can go.
Others (for subscribers)
The most oversold and overbought stocks on the TSX
Research Report: One of the market’s most reliable technical indicators is signalling something very bullish
Monday’s analyst upgrades and downgrades
Globe Advisor
What to watch out for when investing in spin-offs
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Ask Globe Investor
Question: Why have my Brookfield shares fallen so much since the spinoff?
Answer: Well, you would expect shares of Brookfield Corp. (BN) to trade at a significantly lower price than its predecessor, Brookfield Asset Management Inc. (BAM.A). After all, the company spun off 25 per cent of its asset management business.
But here’s the thing: If you add back the new Brookfield Asset Management Inc. (BAM) shares that you received, you’ll see that the overall vale of your investment is about the same.
Immediately prior to the spinoff, BAM.A traded at $58.88. As of a couple Fridays ago, BN was trading at about $47.50, and BAM was priced at $42.50. If you add the market price of BN to one-quarter of the price of BAM – to reflect the one-for-four distribution of BAM shares – the sum is $58.12. So you’re pretty much back to where you started.
--John Heinzl
What’s up in the days ahead
Veteran fixed income fund manager Tom Czitron will tell us why investors should give high-yield bonds a second look.
Click here to see the Globe Investor earnings and economic news calendar.
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Compiled by Globe Investor Staff