Hedge funds set new single day record in dumping Chinese equities – Goldman Sachs

Hedge funds recorded the largest single-day net selling of Chinese equities on Tuesday, October 8, as China’s National Development and Reform Commission underwhelmed with no major stimulus, a Goldman Sachs note showed.

Hedge funds not only reduced long positions, but also increased short positions, with long sells being double the amount of short sells.

“Three-quarters of the net selling was driven by selling in A-shares as market opened up after a week long holiday. The remaining one-quarter of the selling activity was in H-shares while activity in ADRs was relatively muted.” according to the research note.

“To put this in a historical context, this net selling was 1.4 times larger than the previous record for net selling and represents a 6.5 Standard Deviation event on our records.” Goldman added.

After a week-long vacation in China, traders returned to a tumultuous market as the government refrained from offering the expected support to its troubled economy. This led to wild swings in share prices and record turnover on the mainland and Hong Kong bourses.

China’s CSI300 blue-chip index touched its highest level in early trade on Tuesday since July 2022, while the Shanghai Composite Index also marked the highest level since December 2021. The indexes, however, gave up large gains, losing their back-from-holiday momentum.

Traders will now keep a close watch on the Finance Minister’s discussion due on Saturday over moves to strengthen fiscal policy to shore up growth.

Tickers that saw notable price swings on Tuesday: Xpeng (XPEV), Li Auto (LI), NIO (NIO), Dada Nexus (DADA), Baozun (BZUN), JD.com (JD), Vipshop (VIPS), Trip.com (TCOM), Gaoto Techedu (GOTU), Dingdong (DDL), Smart Share Global (EM), QuantaSing Group (QSG), and Tuniu Corp. (TOUR).