Wall Street's interest in Chinese assets is rapidly increasing. From September 23 to September 27, multiple Chinese stock ETFs like KWEB, FXI, and MCHI saw significant asset growth, with net inflows reaching new highs for the past year or even three years. These ETFs have hit new highs and demonstrated strong growth.
During the week, KraneShares China Internet ETF (KWEB, Financial) received net inflows of $199 million, the highest since March 2023, with a weekly gain of over 26%. As of September 27, KWEB's asset size rose to approximately $5.89 billion, reclaiming its position as the largest Chinese stock ETF outside China. This ETF is notably one of the major investments of renowned hedge fund manager David Tepper (Trades, Portfolio).
In Q2 2023, David Tepper (Trades, Portfolio)'s Appaloosa Management notably increased its holdings in Chinese index funds, adding 565,000 shares of iShares China Large-Cap ETF (FXI), worth $180 million, and 1,015,000 shares of KWEB, worth $121 million.
As of September 25, KWEB's asset size was $4.65 billion, which surged to $5.89 billion by September 27, marking a $1.24 billion increase in just two trading days and a growth of 26%. Compared to the end of August, with a size of $4.18 billion, the growth rate exceeded 40%, showing a rapid rise in investments.
MSCI China ETF-iShares (MCHI) also saw a weekly gain of over 19%, with its asset size reaching $5.21 billion as of September 27, up more than 20% from the end of August. From September 23 to September 27, the net inflows amounted to $254 million, reversing weeks of outflows and setting a three-year high for weekly inflows.
Similarly, iShares China Large-Cap ETF (FXI) had net inflows of $497 million during the week, a three-year high, with its asset size growing to $4.71 billion by September 27, nearly 19% higher than at the end of August.
The 3x Bull FTSE China ETF-Direxion (YINN) surged almost 60% in a week, with its asset size increasing by 56% by September 27 compared to the end of August.
David Tepper (Trades, Portfolio) is not alone in betting on Chinese assets. Nick Wilcox, Managing Director at Man Group Plc, also expressed optimism, expecting the Chinese stock market to continue its rebound, supported by continuous policy measures and Federal Reserve's easing policies. This optimism is built on improving profitability and more room for China’s rate cuts.
Michael Burry (Trades, Portfolio), famous for his portrayal in "The Big Short", has also increased his investments in Chinese stocks. As per the SEC, by the end of Q2 2023, Burry's hedge fund, Scion, significantly reduced its total U.S. stock market value but massively increased its holdings in Alibaba, making it the fund’s largest position with a market value of $11.16 million, accounting for 21.26% of its portfolio. Scion also increased its holdings in Baidu by 35,000 shares, making it the fourth-largest holding.
Institutions have also ramped up their stakes in various Chinese stocks such as Pinduoduo, Alibaba, NetEase, JD.com, Huazhu, KE Holdings, iQIYI, Manbang, Trip.com, New Oriental, and Tencent Music. For instance, JPMorgan significantly increased its shares in Pinduoduo, Alibaba, and iQIYI during Q2 2023. The bank bought 3.19 million shares of Pinduoduo, increasing its holdings by 63%, valued at $1.101 billion at the end of the quarter, added 2.84 million shares of Alibaba, increasing by 32%, and bought 11.184 million shares of iQIYI, increasing by 72%.
Investment giant Baillie Gifford (Trades, Portfolio) reduced its holdings in U.S. tech stocks like Nvidia, while increasing its stake in Pinduoduo by 348,000 shares, its second-largest holding increment of the quarter. Soros Fund also bought 1.025 million shares of Alibaba and 1.275 million shares of JD.com, with end-of-quarter values at $73.8 million and $32.95 million, respectively.
