28/07/2025

BIZ & FINANCE MONDAY | JULY 28, 2025

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Chinese stock pickers lead global hedge fund gains

HONG KONG: Hedge funds focused on Chinese equities posted double-digit returns in the first half of the year, outperforming global peers, fuelled by a rebound in Hong Kong stocks and bets on artificial intelligence and “new consumption” firms. Some fund managers said their more agile use of hedging tools also helped cushion losses during the market turmoil in April, triggered by US President Donald Trump’s announcement of “reciprocal tariffs” on all trading partners. The Greater China Equities Hedge Fund Index tracked by With Intelligence delivered a 15% gain in the first half, topping the hedge fund data platform’s regional and strategy benchmarks. Hong Kong- and Shenzhen-based Triata Capital rose 45% in the first six months and 62% by July 15, following a 19% gain in 2024. The US$1.2 billion hedge fund has reaped rewards from its concentrated bets on undervalued AI software, data centres, internet platforms and selected consumer stocks such as education and hotels. “Even following this year’s news on DeepSeek, we still see underappreciated upside in China’s AI software space,” said Sean Ho, founder and chief investment officer

current China market as a “silent bull market”, noting that global capital has yet to return and Chinese company valuations remain low relative to developed market peers. Geopolitical tension is also abating. “It seems the market is pricing in gradual improvements, with little attention paid to the tariff deadline,” Luk said. Simon Hopkins, CEO of Singapore based Milltrust International Group, a hedge fund allocator, said he plans to increase exposure to China in the second half, drawn by the country’s AI innovations and precision manufacturing capabilities. “There is going to be a huge recognition that Chinese technology is a place that is going to attract a lot of capital,” he said. “The US dominance in that area is being undone.” – Reuters

shockwaves through global markets in early April. That triggered a 13% plunge in the Hang Seng Index on April 7 – its steepest single-day drop since 1997. Still, prolonged geopolitical uncertainties have prompted Chinese fund managers to sharpen their use of hedging tools. “We had rapidly increased hedging positions and significantly reduced net exposure of our portfolio during this period of wild market volatility,” Hong Kong-based Golden Nest Capital said in its June newsletter. That helped the fund, which targets high-quality, low-volatility returns, record a 12th consecutive month of positive returns. While near-term volatility may rise as the deadline for a US-China tariff truce approaches, fund managers are staying bullish. FountainCap’s Luk described the

The Shanghai Composite Index just hit a new high for the year last week. FountainCap Research & Investment capitalised on what it calls “cute economy”, or companies that offer emotionally engaging products aimed at young consumers. The US$2 billion firm’s flagship long-only fund was up 22% from January to June. “Obviously Pop Mart is the best representation of this, but other things like pet care would fall under this too,” said Steven Luk, CEO of FountainCap. Shares of “blind box” toymaker Pop Mart, FountainCap’s top holding, have surged roughly 200% so far this year. The first half was not smooth sailing. Trump’s unexpected tariff announcement and China’s immediate countermeasures, sent

o Hong Kong equities rebound amid bets on AI and ‘new consumption’ firms at Triata, which leverages a significant amount of alternative data. Many internet companies’ new business lines, empowered by AI technology, “present pure upside optionality”, he said. Hong Kong’s Hang Seng Index and MSCI China jumped 20% and 16%, respectively, in the first six months, among the world’s best performers. The rally extended into July, with previously lagging mainland stocks catching up.

Japan says US$550b package could finance Taiwanese chipmaker in US TOKYO: Japan’s US$550 billion (RM2.3 trillion) investment package agreed in last week’s US tariff deal could help finance a Taiwanese firm building semiconductor plants in the United States, Japan’s top trade negotiator Ryosei Akazawa said. Japan agreed to the sweeping US-bound investment initiative, which includes equity, loans and guarantees, in exchange for lower tariffs on its exports to America. However, the structure of the scheme remains unclear. “Japan, the United States, and like-minded countries are working together to build supply chains in sectors critical to economic security,” Akazawa told public broadcaster NHK. To that end, he said projects eligible for financing under the package are not limited to US or Japanese firms. “For example, if a Taiwanese chipmaker builds a plant in the US and uses Japanese components or tailors its products to meet Japanese needs, that’s fine too,” he said, without specifying companies. The US is significantly reliant on Taiwan’s TSMC for advanced chip manufacturing, raising economic security concerns due to geographic proximity to China. TSMC announced plans for a US$100 billion US investment with President Donald Trump at the White House in March, on top of US$65 billion pledged for three plants in the state of Arizona, one of which is up and running. Japan will use state-owned Japan Bank for International Cooperation and Nippon Export and Investment Insurance for the investments. A recent law revision has enabled the former to finance foreign companies deemed critical to Japan’s supply chains. Akazawa told NHK that equity investment would account for just about 1-2% of the US$550 billion, suggesting that the bulk will come in the form of loans and guarantees. Asked about the White House statement that the US would retain 90% of the profits from the package, he clarified that the figure refers only to returns on equity investment, which would represent a small fraction of the total. – Reuters

A container ship is berthed at the port in Qingdao, in China’s eastern Shandong province. – AFPPIC

China’s industrial profits fall further in June BEIJING: China’s industrial profits continued to fall in June, data showed yesterday, as entrenched producer deflation put more margin pressure on businesses in the face of subdued domestic demand and lingering global trade uncertainty. As China faces a complex and changing external environment, it must deepen the formation of a “unified national market, expand and strengthen domestic circulation and promote high-quality development of the industrial economy”, said Yu Weining, a statistician at the bureau.

Automobile Group and JAC Group expect to post their biggest ever second-quarter losses next month. China’s leaders pledged this month to ramp up efforts to regulate aggressive price-cutting, fuelling expectations that a fresh round of industrial capacity cuts might be approaching. But analysts say this round of supply-side reforms will not pull China out of deflation as quickly as a decade ago, citing challenges such as job losses. State-owned firms recorded a 7.6% decline in profits in the first half. Private-sector companies reported a rise of 1.7% while foreign firms logged a 2.5% gain, the data showed. Industrial profit numbers cover firms with annual revenue of at least 20 million yuan (RM11.8 million) from their main operations. – Reuters

China’s economy slowed less than expected in the second quarter in a show of resilience to US tariffs. But punishing price wars among producers have prompted Beijing to pledge tougher regulations for autos and solar panels, among other industries engaged in cutthroat competition. Profits at China’s industrial firms fell 4.3% in June from a year earlier, following a decline of 9.1% in May, while first-half profits were down 1.8% versus a slide of 1.1% in the period from January to May, National Bureau of Statistics data showed.

Lu Zhe, chief economist at Soochow Securities, said industrial profits may improve, as China’s actions against self-destructively fierce competition and a government trade-in scheme – a version of a “cash for clunkers” programme – should help control the price war amongst companies and expand consumer demand. Factory-gate deflation deepened last month to its worst in almost two years, as softening domestic demand worsened overcapacity woes. State-owned automakers Guangzhou