26 October 2016
As recently as two weeks ago, Raymond Dalio was still a vocal bull on the Chinese stock market. Photo: Bloomberg
As recently as two weeks ago, Raymond Dalio was still a vocal bull on the Chinese stock market. Photo: Bloomberg

Biggest hedge fund turns bearish on China, saying steer clear

The world’s biggest hedge fund has gone from raging bull to outright bear on the world’s fastest-growing economy.

Bridgewater Associates LP told investors this week the country’s recent stock market rout will likely have broad, far-reaching repercussions, The Wall Street Journal reported.

“Our views about China have changed,” Bridgewater’s founder, Raymond Dalio, and his colleagues wrote in a note sent to clients earlier this week.

“There are now no safe places to invest.”

Dalio and Bridgewater have joined a growing chorus of high-profile investors who are challenging the long-held view that China’s growth will fuel the rise of investments from commodities to bonds and shares in multinational firms.

The world’s second-largest economy faces renewed questions about the sustainability of its growth and the government’s commitment to loosening its grip on the heavily controlled markets.

Kingdon Capital Management LLC, a New York hedge fund firm, told clients this week it had sold all its shares in Chinese companies listed on the Hong Kong stock exchange.

It said it was spooked by the fallout from a surge in China in the use of borrowed money to purchase stocks, particularly after authorities cracked down on the practice, helping drag down Kingdon’s investments.

The firm said it would wait until the level of such borrowing in the market drops further before returning.

Overseas investors have pulled cash out of Chinese stocks via Shanghai-Hong Kong Stock Connect for 12 of the past 13 trading days, Hong Kong stock exchange figures show.

The shifts by Kingdon and Bridgewater follow a series of concerns raised publicly last week about China by other high-profile hedge fund managers, including Elliott Management Corp. founder Paul Singer, Perry Capital LLC founder Richard Perry and Pershing Square Capital Management LP founder William Ackman.

“It looks worse to me than 2007 in the United States,” Ackman said during an investment conference in New York, noting the unreliability of the government’s economic statistics.

“Much worse.”

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