Hedge Fund Managers’ Take on the Chinese Currency and Economy

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Views of hedge fund managers

David Tepper, owner and founder of Appaloosa Management, is of the opinion that Chinese markets will see further devaluation in the yuan in the upcoming months. He thinks that the yuan is highly overvalued and needs further correction. Similarly, Crispin Odey, founder of Odey Asset Management, which is valued at $12 billion, also believes the Chinese currency will fall due to persistent weakness in the economy.

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Major hedge fund houses such as Passport Capital, the $4.4 billion hedge fund firm led by John Burbank, and Coatue Management, which has $14.4 billion in assets under management and is headed by Philippe Laffont, have reduced their holdings in 58.com (WUBA), Ctrip.com International (CTRP), and JD.com (JD). Similarly, Tepper has also recently sold off all his holdings in Alibaba Group Holding (BABA). All these fund houses share the same view about Chinese markets and are losing faith in China’s ability to turn its economy around.

Mutual funds such as the Guinness Atkinson China and Hong Kong Fund (ICHKX) and the Eaton Vance Greater China Growth Fund Class A (EVCGX) have holdings in some of the above-mentioned companies.

Inclusion in the SDR basket

With the yuan being included in the SDR (Special Drawing Right) currency basket by the IMF (International Monetary Fund), it may have joined the currency war. Some argue that the currency may depreciate further, which could be good for China’s economic growth.

In the next part of this series, we’ll analyze China’s foreign reserves.

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