US hedge funds dumped shares in Chinese companies in Q2

By Carolina Mandl

NEW YORK (Reuters) – U.S.-based hedge fund investors such as Coatue, D1 Capital and Scion cut their exposure to Chinese companies in the second quarter, as doubts grew over whether the country’s long-awaited reopening would boost its economic growth, and geopolitical tension increased.

Coatue Management LLC, founded by Philippe Laffont, formerly of Tiger Management, cut its positions in Alibaba (NYSE:), Baidu (NASDAQ:), JD (NASDAQ:).com, Kanzhun, KE Holdings, Li Auto and PDD Holdings, regulatory filings showed.

The hedge fund slashed its position in Alibaba by roughly 90% from March to June, filings showed.

D1 Capital Partners also dumped all its 1.7 million shares – or $176.8 million – in Alibaba, according to documents.

Louis Bacon’s Moore Capital Management sold over $200 million in shares of Alibaba, exiting its position in the company.

Michael Burry’s Scion Asset Management sold small positions it had in both Alibaba and JD.com.

Every quarter, institutional investors have to disclose their equity positions in so-called 13-F filings, but they do not provide any explanation for the positioning changes.

Although they are backward looking, many investors scour them for trends.

The changes in positioning come as China’s abandonment of COVID-19 controls late in 2022 raised hopes that its economic growth would surge, but that outlook quickly darkened as data has showed an uneven recovery, while U.S.-China geopolitical tensions also raised concern.

Worries over China’s economy have heated up in recent days, as the country’s largest private real estate developer, Country Garden seeks to delay payment on a private onshore bond for the first time, the latest sign of a stifling cash crunch in the property sector.

Meanwhile, last week U.S. President Joe Biden announced an executive order to prohibit some U.S. technology investments in China, sparkling concerns among fund managers.

(This story has been corrected to change D1’s position in Alibaba from $1.7 billion to $176.8 million in paragraph 4)