Sofia Horta e Costa
They were into China’s post-Covid stocks rally. Now they’re first out.
Hedge funds aren’t hanging around for a catalyst from National People’s Congress next month. They’ve already trimmed their exposure to Chinese shares in February, especially those listed in Hong Kong, according to data from Goldman Sachs Group Inc.’s prime brokerage.
Reductions of net positions, a measure that accounts for offsetting long and short bets, have been less pronounced for Chinese equities traded on the mainland and in the US, the data show.
When it comes to international standards on ESG and accounting, the gulf between China and the West is widening. News that Beijing is asking some companies to employ local accountants adds another hurdle to global investors trying to navigate China’s corporate landscape. Though one investor in Norway doesn’t seem to mind if stocks are sanctioned by Washington.
Here’s my roundup of the week’s key developments for China markets.
Big Four No More
China’s deep fears over data security mean that US accountants may soon be unwelcome, with state-owned companies being urged to hire local alternatives to the so-called Big Four. But in doing so, China risks scaring away international investors seeking more transparency.
- China Urges SOEs to Drop Big Four Auditors on Data Risk
Toxic Tencent
Dozens of ESG funds sold more than $1 billion worth of Tencent Holdings Ltd. shares in the six months after the company was deemed “non-compliant” with UN principles. Separately, one money manager in Norway is snapping up Chinese stocks that Americans have been forced to sell.
- Tencent Becomes a Can’t-Touch Stock for Some ESG Investors
- Americans Dumping Sanctioned Stocks Find Eager Buyer in Norway
Tech Rivalry
Competition is heating up among China’s Big Tech industry, spooking investors who have only just gotten over the regulatory crackdown. Companies are battling for a bigger slice of the e-commerce market, launching aggressive campaigns to outdo each other on price.
- China Tech Giants Tumble Amid Growing Fears of Price Wars
- Alibaba, NetEase Slump as Earnings Fail to Impress Investors
Crypto Pivot
Hong Kong is turning increasingly pro-crypto and will let mom-and-pop investors trade digital tokens like Bitcoin and Ether. The city’s stock exchange is also studying whether to stay open going during storms and heavy rain — part of a wider effort to restore Hong Kong’s reputation as a financial center.
- Hong Kong’s Crypto Hub Ambitions Win Beijing’s Quiet Backing
- Hong Kong Plans to Allow Retail Trading in Top Crypto Coins
- Hong Kong to Study Allowing Stock Trading During Severe Weather
Selling Bonds
China’s onshore bond market suffered the largest outflows in eight months in January. Active flows are unlikely to return until Chinese bonds yield more than Treasuries or the yuan strengthens. Separately, a top-performing credit manager is reducing her holdings in Chinese property dollar debt after riding a record rally.
- China Bond Outflows Resume as Foreigners Return to Selling
- A Top-Performing Fund Plans to Pare China Property Bond Holdings
The Peacemaker
Roughly one year after Russia invaded Ukraine, China is having a hard time convincing the world it can help end the war as a neutral actor. Russian President Vladimir Putin said he’s waiting for his Chinese counterpart Xi Jinping to visit Russia after China’s top diplomat called the relationship between the two countries “solid as a mountain.”
- China Looks to Show World It Can Broker Russia-Ukraine Peace
- Putin Says He’s Waiting for Xi Amid China Peace Push on Ukraine
- China Blasts US for Military, Cultural ‘Hegemony’ as Ties Sour
Baby Stocks
A city in China plans to give families with a third baby a one-off cash handout of almost $3,000, and just over $700 for those with a second kid. The plan, which will help 25,000 families, got Chinese investors buying shares of companies selling children’s clothes, baby formula and fertility services.
... and three things to watch for next week
- February’s official PMIs are due March 1 — perhaps the first clean set of data after the end of Covid Zero because it won’t be distorted by the reopening wave or the Lunar New Year holiday.
- Investors will also get more insight into the health of corporate China. Weibo Corp., NIO Inc. and Bilibili Inc. are among companies scheduled to release financial results.
- China’s top legislators will begin congregating in Beijing for the first time since the economy reopened and Xi started his third term. The National People’s Congress will begin March 5.
