Why Chinese Stocks Are In A Bear Market And It Doesn’t Matter by Bryce Coward, Gavekal Capital
Chinese stocks are down a cool 30% from their high less than one month ago, but it matters little to most investors. Despite the much touted opening moves by China to allow foreign participation in their stock markets, the reality is that most foreign investors still don’t have full or even partial access to mainland listed equities. The quota system and new Shanghai-Hong Kong Connect are insufficient to meet foreign investors need for ease and liquidity both into and out of the domestic Chinese stock market. MSCI’s recent decision to not include mainland Chinese listed stocks into their featured EM index supports this assertion. In fact, the rally in Chinese equities since the middle of 2014 was almost entirely driven by domestic speculation and the expansion of margin debt. Thus the current bear market is almost certainly affecting local Chinese investors primarily. Due to capital controls, the Chinese markets have usually marched to their own drum and we see little difference in today’s environment.
The Delbrook Resources Opportunities Master Fund was up 9.2% for May, bringing its year-to-date return to 33%. Q1 2021 hedge fund letters, conferences and more Dellbrook is an equity long/ short fund that focuses exclusively on the metals and mining sector. It invests mainly in public companies focused on precious, base, energy and industrial metals Read More