Bridgewater steps back from China as biggest hedge fund slashes stock bets for 7th quarter

The retreat shows how far Chinese stocks have gone out of favour as peers in the US and other emerging markets rallied. MSCI China, the broadest gauge of Chinese stocks, rose 1.7 per cent over the past seven quarters, while benchmark indices in the US, Japan and India surged by 34 to 52 per cent, according to Bloomberg data.

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Why investors can expect more market volatility after recent global stock sell-off

Why investors can expect more market volatility after recent global stock sell-off

In total, the number of companies in Bridgewater’s global stock portfolio jumped to 877 from 677, valued at US$19.2 billion, according to the 13F filing. They included 14 Chinese companies, whose market value shrank by 14.5 per cent last quarter to US$266 million.

In other portfolio adjustments, Bridgewater also reduced its stakes in China-focused exchange-traded funds last quarter. The hedge fund cut its holding in iShare China Large-Cap ETF by 11 per cent and iShares MSCI China ETF by 10 per cent.

Despite the retreat, portfolio diversification into the world’s second largest economy is still “desirable” as Chinese assets are “attractively priced”, Dalio said at the Greenwich Economic Forum in Hong Kong in June. China and the US are in risky positions amid their elevated debt burden and diversification is “more important than ever,” he said in a separate email to the Post.

Dalio relinquished control of Bridgewater in October 2022, after stepping down as CEO in 2017 and chairman in 2021. His current role involves mentoring the committee that has oversight over the firm’s investment strategies.

Foreign institutional investment into China A-shares has plummeted since its 2021 peak of US$67.2 billion, with inflows dwindling to US$13.3 billion in 2022 and US$8.1 billion in 2023. The trend has continued into this year, with a net outflow of US$200 million through last week, according to data compiled by Goldman Sachs.

Bridgewater is not alone in pulling more money out of Chinese stocks.

Alibaba is the owner of the South China Morning Post.