Bull Market In Chinese Stocks Like Alibaba Is Round The Corner, Hedge Funds Say

Top Chinese macro hedge fund Shanghai Banxia Investment Management Center said the nation's stocks rout had run its course, predicting a bull market is around the corner.

The firm rebuilt net-long positions in the mainland-traded A-share market to 40%, according to its September investor letter, Bloomberg reports. 

The firm had kept equities low since June before adding exposure late last month.

The founder Li Bei found it a very good opportunity to buy the dip and long A-shares gradually. 

Investors consider Alibaba Group Holding Limited BABA as the barometer of the Chinese tech industry.

Li's bullish stance added to growing optimism among peers as the government steps up efforts to bolster growth and contain a property crisis. 

About 78% of hedge funds say stocks have fully priced in all negative factors, and the benchmark Shanghai Composite Index has bottomed out at around 3,000, a critical level breached earlier this week, according to an investment firm survey.

Shanghai Yunhan Asset Management Co, another macro fund, started buying stocks in sectors like oil, shipping, and medical equipment in September after cutting equities to zero at the end of June to pocket gains.

The property market, which has been a significant drag on growth, is set to see marginal improvements as local authorities step up support, Yunhan's President Zhang Wenchao said. China managed to keep the virus in check without resorting to massive lockdowns like in Shanghai, he said. 

Even in a worst-case scenario, a weak economic recovery is inevitable, Zhang said. If there's a significant policy shift, including covid curbs, he highlighted the possibility of a V-shaped rebound in the market. 

However, Banxia saw a further 10% possible decline and mainly used derivatives to increase exposure while capping net-long positions at 60%. 

The People's Bank of China Governor Yi Gang said the central bank would nudge lenders to increase loans to the infrastructure, manufacturing, and property sectors to support the economy better.

Yi asserted a vow to "step up the implementation of a prudent monetary policy and provide stronger help to the economy" in a video speech at a central bank governors meeting.