The Strategist

Hedge funds are expecting growth of the Chinese stock market

07/10/2018 - 14:46

Chinese stocks may rise by 20% over the next three years, even if conflicts with the US continue, said Wong Kok Hoi, founder of the Singapore-based APS Asset Management Pte.

If the tension between the US and China in the trade and technology sector weakens, the profit can reach up to 50%, notes Wong Kok Hoi. This, he said, is comparable to the CSI300 index, which lost about 14% this year.

"Everything depends on the negotiations’ outcome," the manager said, noting that markets may be unstable in the medium term.

According to Wong, the Chinese stock market is credible thanks to the strong technology sector. Yet, this is the main source of tension in relations with the US, since the White House sees this as a threat to national security.

On Monday, July 9, CSI 300 rose by 2.8%, and the Shanghai Composite Index added 2.5%.

Optimistic forecast

Wong is not the only one who gives an optimistic forecast for the stock market of China. According to a report published last week by the Shenzhen PaiPaiWang Investment & Management Co., Chinese hedge funds signaled their intention to increase the purchase of shares in July, after the market had become more favorable for this.

APS China A Share fund with assets of $ 2.3 billion increased by 2.6% in the first five months of 2018, ahead of a 5.7% loss in CSI 300 and 6.4% in the Shanghai Composite Index. According to data provider Eurekahedge Pte, the long-term fund on an annualized basis played 13.4% over the past five years, taking the first third of hedge funds investing in China.

Assessing prospects for the development of various sectors of the Chinese economy, Wong Kok Hoi noted, in particular, developments in the field of cybersecurity and the processing of large data, the production of semiconductors, including the Hong Kong-registered Semiconductor Manufacturing International Corp.

But, he said, the most serious confrontation with the US is expected in the sphere of technology, not in trade, since the Made in China program 2025 is pushing forward advanced industries such as robotics, new energy carriers, chips and software.