Risky Chinese Market: A Worry for Investors, Including Bridgewater Associates
Leading hedge fund sheds ownership of these five Chinese equities
The Chinese market continues to be a concern for investors in the current climate. This sentiment seems to be shared by Bridgewater Associates, a renowned hedge fund founded by Ray Dalio, as reported by Barron's. Recent changes to the fund's portfolio suggest that they have sold several of their Chinese stocks.
Shedding Chinese Stocks
The latest portfolio disclosure reveals that the hedge fund no longer holds any shares in Alibaba Group, Bilibili, JD.com, NetEase, or DiDi Global as of June 30, which were part of the portfolio in the first quarter. The total value of these stock sales surpassed a billion dollars. Additionally, Bridgewater Associates reduced its stake in Tencent Music Entertainment from 3.1 million to 3.02 million shares and also trimmed its holdings in other Chinese titles like Agora, BeiGene, Baozun, and Weibo. On a positive note, the fund increased its stake in companies like Baidu by two percent and Zai Lab by 80 percent in the second quarter.
China's Unsettled Market
Chinese stocks have long been seen as risky investments. Recent regulatory crackdowns on tech companies and China's strict zero-COVID policy, which continues unabated, have further complicated matters. In July, the Chinese economy grew at a slower pace than anticipated, leading the Chinese central bank to lower interest rates on Monday.
Legendary investor Ray Dalio founded Bridgewater Associates in 1975, a fund known for its bullish stance on Chinese stocks. Today, it is the world's largest hedge fund, managing around $150 billion in assets.
Enrichment Insights:
Trade and Tariff Pressures:
The Trump administration's imposition of reciprocal tariffs has disrupted global supply chains and earnings forecasts, causing Goldman Sachs to revise its 2025 targets downwards. These tariffs have direct impacts on exporters and indirect risks to China’s economic growth from reduced investment and confidence[1].
Market Volatility:
Chinese equities experienced severe declines in early 2025, with the CSI 300 and MSCI China indices losing much of their gains since early 2024. This volatility can be attributed to "event risks and profit-taking pressures" as tariffs affect trade dynamics[1].
Brokerage Risks:
China's securities firms now carry increased equity-market exposure, amplifying systemic vulnerabilities. This has become a growing concern, particularly if market downturns persist[2].
Recession Contagion:
The probability of a US recession within 12 months has been raised to 35%, which could further strain China’s export-reliant sectors and corporate earnings[1]. These factors suggest a cautious outlook for Chinese equities, driven by policy uncertainty and external demand risks.
- Bridgewater Associates, a prominent hedge fund managed by Ray Dalio, has sold several of their Chinese stocks, including Alibaba Group, JD.com, and Tencent Music Entertainment, totaling over a billion dollars, indicating a potential concern about the risks in the Chinese market.
- The Chinese market continues to be a source of uncertainty for investors, with regulatory crackdowns on tech companies, strict zero-COVID policies, and slower-than-anticipated economic growth, all contributing to the perceived riskiness of Chinese stocks.
- Despite its historical bullish stance on Chinese stocks, Bridgewater Associates has reduced its holdings in Chinese titles like Agora, BeiGene, Baozun, and Weibo, but has increased its stake in Baidu and Zai Lab, suggesting a potentially more cautious investing approach.
- The potential for a US recession within 12 months, coupled with trade and tariff pressures, could further strain China’s export-reliant sectors and corporate earnings, indicating a challenging outlook for Chinese equities.
