HEDGE FLOW Hedge funds buy Chinese stocks for fourth consecutive week

HONG KONG, May 22 (Reuters) – Global hedge funds added to their holdings of Chinese equities for a fourth straight week, joining hordes of investors trying to get ahead of a rebound in the market.

The beaten-down stocks (.SSEC), opens new tab in the world’s second-largest economy have been rallying since February as Beijing ramped up measures to address economic challenges and as macro data showed signs of recovery.

Hedge funds bought Chinese stocks in the past seven out of eight weeks, Goldman Sachs prime brokerage team said in a note on Friday, seen by Reuters on Tuesday. The report didn’t disclose the amount of purchase.

China markets have unexpectedly outperformed world’s major markets so far this year with Hong Kong’s Hang Seng Index (.HSI), opens new tab up by a third from its nadir in January. The MSCI China index (.dMICN00000PUS), opens new tab is up 16% so far this year.

On Monday, Goldman Sachs raised the price targets for both MSCI China and China’s blue chip CSI 300 Index (.CSI300), opens new tab.

Some hedge fund investors are betting on the rally by buying call options as a way to capitalize bigger gains from the rise in stocks, Goldman Sachs said in a separate note on Friday.

“The combination of decade-low allocations to China from both hedge- and long-only mandates and the blistering pace of the recovery has caught investors off-guard in the past months,” analysts led by Kinger Lau wrote.

Source: REUTER