In This Article:
(Bloomberg Opinion) -- As the coronavirus rages in China, the world’s most prominent hedge-fund billionaires are starting to open their wallets. It doesn’t hurt that Shanghai is at the cusp of a bull market.
Ray Dalio’s family charity and his hedge fund Bridgewater Associates LP are donating $10 million to fight the virus. Earlier this month, Citadel founder Ken Griffin’s hedge fund and securities firm put up $7.5 million.
It’s high time that U.S. hedge funds start cozying up to China, especially as they suffer at home. Last year, mainland-focused funds returned 23.2%, compared with 9.7% for their global peers, data provided by Nasdaq-owned eVestment Inc. show. Greenwoods Asset Management Ltd.’s $2.2 billion Golden China Fund jumped 47.3%, while Orchid Asia Group Management Ltd.’s China Master Fund rose 32.2%.
As China opens up its financial industry, foreign hedge funds are walking a fine line of making money without alienating regulators. Both sides are happy so long as stocks are rising. But if the market turns sour, regulators could be quick to shut down those who dare to short it. That's why it pays to be in Beijing’s good graces now.
Dalio has always enjoyed a rock-star investor status in China, despite his prescient warning before the spectacular boom-and-bust of mainland shares in 2015. Griffin’s relationship with Beijing is more checkered. In August of that year, officials suspended a Shanghai trading account operated by Citadel Securities, the hedge fund’s brokerage arm, and subsequently launched an investigation into its “malicious short-selling.” Citadel only managed to redeem itself with a $97 million settlement last month. In that light, Griffin’s $7.5 million relief money looks like extra atonement.
China’s stock market enjoyed a bull run last year, and there’s good reason to believe 2020 will be quite a bit of fun, too. Markets are certainly trading like there’s a big stimulus in the works.
The blue-chip CSI 300 Index has recouped all of its losses since the prolonged Lunar New Year break, while the new economy-focused ChiNext Index has notched a 19% gain so far this year. China’s 10-year government bond yield has fallen below 3% for the first time since late 2016.
Traders are latching onto a speech President Xi Jinping made during the Politburo meeting on Feb. 3. He insisted on delivering this year’s economic target — broadly interpreted as keeping gross domestic product growth at around 6% — despite the virus. Given that many factories remain closed and millions are effectively under curfew, that would mean helicopter money now and big-ticket infrastructure spending down the road, when migrant workers are once again allowed to move about.