Saturday, February 24, 2024

Top trades of 2023: Tech in, China out

Photo by m. on Unsplash


Tech and AI dominate

Tech stocks fuelled hedge fund gains in the first seven months, and the latest regulatory filings show how many leading names increased exposure in Q2.

David Tepper’s Appaloosa Management was a notable buyer in tech and semiconductors stocks last quarter, according to new 13-F filings.  

Bill Ackman was another, boosting his holding in Alphabet, while Third Point increased its Amazon, Nvidia and Taiwan Semiconductor positions.

As AI breakthroughs dominated market headlines, even macro managers got in on the act, with Rokos Capital Management reported to have bought more than $2.7bn of shares in the Invesco QQQ Trust in Q2.

It has been a tricky period for short-sellers. They lost $37bn in June, according to research firm Ortex, as the first half closed out with a stock market surge centred on tech stocks.

A remarkable first half rally saw the tech-heavy Nasdaq rise 31.7%, its best H1 in 40 years, and S&P 500 rise 15.9%.

But bears hold out for a fall

Despite the marked improvement in inflation expectations in the US, some hedge funds still see a hard landing ahead — and this year’s rally set to collapse.

Scion Asset Management founder Michael Burry of Big Short fame took out huge positions betting against the S&P 500 and Nasdaq 100. Vantage Asset Management, meanwhile, sees the rally in equities coming to “a halt as investors come to grips with slowing US growth, and seasonal factors are likely to compound the selling pressure,” Bloomberg reported.

China trends down

China has been a major talking point, with hedge funds overall taking a bearish stance — both in terms of Q2 trades and future plans.

Coatue, D1 Capital and Tiger Global were among the US hedge funds to cut their exposure to Chinese companies in Q2, Reuters reported, with Asia’s largest economy continuing to underperform.

That comes as Chinese hedge fund activity begins to decline. Preqin tracked a fall in active China-focused hedge funds for the first time in more than a decade — just five new funds launched in H1 and another 18 funds liquidated.

Contrast that with the likes of Dubai and Singapore, which are seeing increased interest. More hedge funds are starting up or opening offices in Dubai, while Singapore’s appeal was underlined by the news last week that Point72 has quickly increased office headcount to more than 100.

Shorts rise against UK property-builders

Away from 13Fs, UK short-selling data showed more bets against UK property developers as UK house prices continue to dip.

Marshall Wace has been betting against Barratt Developments and Land Securities, while Caxton has been betting against Hammerson, Financial News reported.