Goldman’s China Hedge Fund Clients Had Second-Worst Month Ever
Goldman’s China Hedge Fund Clients Had Second-Worst Month Ever
(Bloomberg) -- Goldman Sachs Group Inc.’s hedge fund clients focused on Chinese stocks recorded their second-worst monthly loss ever in July, according to client data compiled by the bank.
Fundamental long-short managers targeting the market lost an estimated 5.6% on average during the month, sinking to a 1.1% decline this year, the Wall Street bank said in a note to clients on Monday. The monthly drop was the second only to March 2020, according to Goldman’s records.
Hedge funds focused on Chinese stocks were pummeled in July amid Beijing’s harsher-than-expected crackdown on the nation’s biggest technology corporations as it reined in e-commerce, ride-hailing and online education. The MSCI China Index plunged 14% in July, the steepest in nearly a decade. And the uncertainty continued this week, as Tencent Holdings Ltd. dived as much as 11% Tuesday after an offshoot of China’s official news agency decried the “spiritual opium” and “electronic drugs” of games.
Goldman Sachs had earlier seen clients focused on fundamental stock-picking for China headed for their worst-ever monthly decline as late as July 27, according to a previous note from the firm’s prime brokerage, which helps hedge funds settle trades as well as lending them cash and securities. Funds were saved by rebounds late in the month, after Chinese authorities stepped in to reassure investors.
A representative for Goldman Sachs in Hong Kong declined to comment.
During July, China was the main driver behind the largest net selling of emerging Asia stocks since November, the bank said in Monday’s note. Still, hedge funds did not appear to be the dominant source of selling pressure in Asian equities during the final week of the month, Goldman Sachs said, adding that such clients bought the dip on July 28 and 29.
Information technology was the most net sold industry during the month, followed by materials and industrial companies, it added.
Goldman Sachs and Morgan Stanley are the largest prime brokers in Asia.
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