Michael Burry Trimmed Some China Tech Bets Before DeepSeek-Driven Rally

Michael Burry, the founder of Scion Asset Management, recently trimmed his positions in China tech stocks before the DeepSeek-driven rally. He specifically reduced his holdings in companies like Alibaba, Tencent, and JD.com. The reason behind this move was that he believed the Chinese tech sector was facing regulatory headwinds and slowing growth, which made these stocks less attractive.

However, the recent rally in Chinese equities, driven by the success of DeepSeek, has led some investors to question their bearish views. The Hang Seng Tech index has risen more than 30 percent in the past month, and China's onshore and offshore equity markets have added more than $1.3 trillion in total value. Hedge funds have been "piling into Chinese equities at the fastest pace in months," while the MSCI China Index is on track to outperform its Indian counterpart for a third-straight month.

Despite the optimism, Burry remains skeptical about the sustainability of the rally. In an interview with Bloomberg, he expressed his skepticism about the fundamentals of the Chinese economy and the government's policies. He argued that the rally is driven by speculation rather than fundamentals and that the Chinese government is not addressing the structural issues in the economy.

While Burry has not made any significant changes to his investment strategy in response to the rally, his bearish views on the Chinese tech sector have broader implications for investors. His investment in DeepSeek, which has seen its stock price surge by over 300% since its IPO, highlights the potential for significant returns in the China tech sector. However, his approach also underscores the importance of understanding the local market dynamics and regulatory environment, as well as the investment opportunities in AI and tech.

In conclusion, while the DeepSeek-driven rally has led to a significant shift in investor sentiment towards Chinese equities, Michael Burry's bearish views on the Chinese tech sector serve as a cautionary tale. Investors should remain vigilant and consider the broader market dynamics and regulatory environment when making investment decisions in the China tech sector.