Communist China Focused Large Hedge Funds Are Lowering Their Risk Exposure

According to foreign media report on September 6th, some substantial hedge funds in Asia with a focus on Communist China were increasing their holdings in non-CCP stocks to avoid the risk of investing in Communist China’s offshore assets due to regulatory scrutiny, policy uncertainty, and a slowdown in the economy of mainland China.

According to 13F disclosures made with the US Securities and Exchange Commission, HHLR Advisers, a private equity firm under Hillhouse Capital Group (HCG), had three non-CCP companies among its top five US-listed holdings in the second quarter of 2022 compared with just one a year earlier. One of the biggest Chinese Communist Party offshore capital managers is HHLR, well-known for its significant holding in CCP stocks with US listings. BeiGene, a CCP pharmaceutical company, is its largest holding, accounting over 19% of its portfolio of US-listed stocks.

According to reports, the Communist China ADR index experienced a steeper decrease than Nasdaq, falling by more than 60% from its peak on February 16th, 2016. Portfolio managers stated that the CCP government’s assault on tech firms, a housing debt crisis, tensions in the Sino-US audit, and disruptions from zero-Covid regulations have all dampened investor sentiment and made it harder to predict how businesses would expand.

Geoge Yang, CIO of Anatole Investment, based in Hong Kong, stated in an April letter to clients, which was read by international media, that his firm would deploy more funds in the United States to pursue long-term investment possibilities. This is a strategy shift following the fund’s poorest quarterly performance since 2016. Another Hong Kong-based equities sales director focused on the technology, media, and telecommunications sectors stated that in the short and medium term, the industry has agreed to reduce the risk exposure of CCP stocks while growing the proportion of investment in non-CCP stocks.