The strong rise of the Chinese stock market in late September has already filled overseas investors with optimistic prospects. The Chinese domestic fund under the globally renowned hedge fund Bridgewater has seen its return rate climb to 31% in the first three quarters of this year, which makes Bridgewater more optimistic about the Chinese market.
In its third quarter letter to investors, Bridgewater emphasized that although the Chinese stock market has rebounded, its stock price is still relatively low compared to its profit prospects. It will continue to moderately increase its holdings in Chinese stocks and go long in bonds, but maintain a neutral stance on commodities.
Qiao Shui stated that China's large-scale stimulus plan has significantly increased investors' risk appetite, and secondly, the Fed's interest rate cuts have improved global liquidity, increasing the attractiveness of risk assets.
It also added that although it is currently unclear whether China's stimulus measures will be accompanied by strong fiscal support to maintain the recovery of the Chinese market, it is expected that the overall policy environment in China will remain loose, which is relatively favorable for risk assets.
Buy, buy, buy
Earlier this year, Bridgewater Fund's asset management scale in China increased to over 40 billion yuan (approximately 5.6 billion US dollars). Its all-weather strategy achieved a return rate of 19% in September, and a return rate of 31% in the first nine months of this year.
Due to the expected favorable policy situation, Bridgewater Fund also stated that it will moderately long short-term bonds. The fund also plans to increase its long-term debt exposure, stating that although the market has digested expectations of policy tightening in the bond market in the coming years, Bridgewater Fund still sees investment opportunities.
Lars Naeckter, Head of Equity Derivatives Research for Bank of America's Asia Pacific region, also pointed out that the demand for bullish bets has increased since China announced a series of measures to revitalize the economy.
He added that for Chinese stocks listed in Hong Kong and US exchange traded funds (ETFs) tracking these stocks, the cost of call options relative to put options is close to the highest level since 2008.
Principal Asset Management, a US fund management company, also stated that China is taking meaningful measures to revitalize the economy, which has boosted investor confidence. It also stated that it is increasing its holdings in Chinese stocks, both indirectly through Hong Kong and directly through China.
The company's global stock portfolio manager Steve Larson emphasized on Thursday that his view on the Chinese market has shifted from skepticism to a more optimistic outlook.