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CONCENTRATED bets on popular Chinese e-commerce giant PDD Holdings may have led to losses in billions of dollars for hedge funds from a crash in its shares following downbeat comments from its executives.
US-listed shares in PDD, the owner of low-priced retailer Temu, plummeted 33 per cent this week, and 30 per cent in the third quarter.
By the numbers
Global hedge funds held 102.8 million shares of PDD at the end of June, up from 91.7 million shares the previous quarter, according to an estimate by WhaleWisdom, a website that tracks and analyses quarterly US 13F filings.
It is unclear if hedge funds increased or reduced their investments since then, but Reuters’ calculations show the 30 per cent fall in PDD shares between the end of June and Aug 29 would have wiped out a combined value of roughly US$4 billion from those positions.
Some of Asia’s largest hedge funds, including billionaire Zhang Lei’s HHLR Advisors, Tairen Capital, Greenwoods Asset Management, were among the major investors in PDD by market value as of June 30, according to WhaleWisdom.
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Among global hedge fund giants, David Tepper’s Appaloosa Management owned 1.94 million shares of PDD at the end of the second quarter, worth more than US$250 million.
The context
PDD missed market estimates for quarterly revenue on Monday. During the earnings call, the firm said revenue growth would face pressure due to intensified competition and external challenges, and there were no plans for dividends or share buybacks.
Why it’s important
PDD has been a top pick for many funds investing in China, as the budget product platform is one of the few firms in the country still delivering growth and expanding globally amid the economic downturn.
The unexpected bearish guidance, coupled with the stock slump, has further dampened sentiment toward already struggling Chinese equities, dragging down tech and consumer shares.
“PDD was a crowdy long position for many calibre of clients,” said Andy Maynard, global head of equities at China Renaissance Securities, “I’m sure the 30+ per cent selloff has been difficult for all types of funds.”
“In terms of the guidance, it was really poor… Overall, it will make some investors as pessimistic as ever, and likely mean a continuing narrowing of their portfolios into names that they trust, have transparency and can see future growth,” he said. REUTERS
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