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(Bloomberg) – Singapore hedge fund Asia Genesis Asset Management will close its macro fund after suffering an “unprecedented drawdown” due to falling Chinese stocks and rising Japanese stocks.
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Chua Soon Hock’s Asia Genesis Macro Fund lost 18.8% in the first few weeks of January, according to a letter to investors seen by Bloomberg News. According to the letter, the fund is refunding money to investors who suffered losses from long positions in Hong Kong and Chinese stocks and short positions in the Nikkei Stock Average.
“I have reached a point where I have lost confidence as a trader,” Chief Investment Officer Chua said in the letter. Tough trading since October and a “disastrous” January “proved that my past experience is no longer valid and is actually working against me.”
Asia Genesis, which managed $330.2 million at the beginning of the year, did not respond to requests for comment.
Mr Chua said the fund had made a “big mistake” in trying to find the bottom in Hong Kong’s benchmark index. He also said he was “surprised” by the Nikkei Hang Seng spread, which sets the prices of Chinese and Japanese stocks at the same value as in 1991.
China’s benchmark CSI300 index hit a five-year low on Monday as the ongoing housing slump curbs economic growth and deflationary pressures mount. Hong Kong’s Hang Seng Chinese Enterprise Index, which tracks Chinese companies listed in Hong Kong, has lost more than half of its value since the end of 2020.
By contrast, Japanese stocks have tumbled, rising to a 34-year high this month as authorities and stock exchanges urge companies to improve shareholder value and corporate governance.
The collapse in Chinese stocks has hit the country’s asset management sector hard, with the number of mutual fund closures reaching a five-year high, another sign of declining investor confidence. There is.
Chinese Premier Li Qiang on Monday urged authorities to take “stronger” measures to stabilize his country’s struggling stock market and investor confidence. Ministers said after the meeting that China needs to improve macro policy coherence to ensure economic recovery.
So far, policymakers have refrained from taking aggressive steps to boost growth. Speaking at the World Economic Forum in Davos earlier this month, Premier Li pointed out that the economy exceeded last year’s 5% growth target without resorting to “massive stimulus”.
“I still cannot understand the contradiction of Chinese policymakers not fighting deflation,” Chua said in the letter.
The final straw for Chua’s fund was expectations that the People’s Bank of China would cut interest rates at its meeting earlier this month. However, the People’s Bank of China left the one-year policy loan rate unchanged, disappointing investors. Moreover, President Xi Jinping’s speech the next day showed stock investors that he was not focused on the market, Chua said. The fund then closed all positions by January 18th.
Mr. Chua had been retired from the hedge fund industry for many years before deciding to return to funds in 2020. His macro fund generated an annualized return of 7.9% from its inception in May 2020 to the end of 2023, with no loss years.
“I lost my knowledge, my trade, my psychological advantage,” Chua wrote. “The principles of risk and reward have been reversed in both the short and long term.”
–With assistance from Bei Hu, Henry Ren, Cathy Chan, Jacob Gu, and Yiqin Shen.
(Updates with comment from Chua in 10th paragraph.)
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