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.
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Why tech stocks rally when companies cut jobs
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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.
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Others (for subscribers)
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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.
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.
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Compiled by Globe Investor Staff