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Alternative Market Briefing

Hedge funds are revisiting their Chinese positions as stocks plummet

Tuesday, July 14, 2015

Komfie Manalo, Opalesque Asia:

Hedge funds are reviewing their positions in Chinese stocks as they question the government’s moves to tame the market freefall by introducing several measures, including slashing its interest rate and reserve ratio requirement, suspending trading on over 40% of listed firms, halting IPOs, and announcing plans for direct liquidity injections in the equity market.

But such measures have left hedge funds uneasy and felt the Chinese efforts have left them less room to maneuver, reported the New York Times.

Dawn Fitzpatrick, chief investment officer at O’Connor, a $5.6 billion hedge fund owned by UBS, told NYT, "The intent is clearly to restore investor confidence and market stability, but this is a huge setback for Chinese capital market liberalization," and added that the government’s moves "will materially impact their ability to attract foreign capital, which has been a key policy initiative."

As of Monday, one third of the Chinese stock market remains frozen and the government is preventing investors who are holding more than five percent of a company’s shares to sell their stocks for at least six months. The government also authorized state-owned companies to buy back shares while brokerage firms are told to pump billions into the market.

The government’s Public Security Ministry also threatene......................

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