US Hedge Funds Bet Big on China's JD.com, GDS: Goldman

In a significant shift, U.S. hedge funds have been piling into Chinese stocks, with e-commerce giant JD.com and data center operator GDS Holdings leading the purchases. According to a Goldman Sachs note, about 25% of U.S. long-short equity funds held a long position in at least one China ADR (American Depositary Receipt) at the start of the fourth quarter, the highest level since late 2021. This surge in interest is driven by China's recent economic stimulus pledges, which have boosted investor optimism.

JD.com, the most popular China ADR among U.S. long-short equity funds, attracted 47 hedge funds, with a net increase of 26 funds boosting their ownership in the third quarter. Following JD.com were data center operator GDS and hotel chain Atour Lifestyle Holdings, reflecting investors' optimism for a recovery in consumption and growth in artificial intelligence demand. The return to Chinese stocks by Wall Street's fast money came amid a sudden stock rally in late September when China announced a series of economic stimulus pledges.



However, this sentiment quickly faded as shares corrected recently due to the fiscal spending plan falling short of expectations and potential U.S. tariff risks in the wake of Donald Trump's election win. Separate 13-F regulatory filings showed billionaire David Tepper's Appaloosa Management increased its investment in JD.com by 69% while more than doubling its stake in e-commerce platform PDD Holdings in the three months through September. Scion Asset Management's Michael Burry, known for his timely bets against the housing sector ahead of the 2008 financial crisis, doubled his long positions in JD.com in the third quarter. However, he also increased bearish positions on the same stock to limit potential losses.

The recent investments by U.S. hedge funds in JD.com and GDS have significantly impacted the market sentiment and performance of these companies. With about 25% of U.S. long-short equity funds holding long positions in China ADRs, the exposure to these stocks has reached its highest level since late 2021. This surge in interest is driven by optimism for a recovery in consumption and growth in artificial intelligence demand, as reflected by the popularity of JD.com and GDS among investors. The notable investments by prominent hedge funds like Appaloosa Management and Scion Asset Management, which increased their stakes in JD.com by 69% and doubled their long positions, respectively, further underscore the bullish sentiment. These investments have contributed to the recent rally in Chinese stocks, with the Hong Kong Hang Seng index reaching a 20-month high and the CSI 300 index rising by 26.7% since mid-September.

In conclusion, the increased investments by U.S. hedge funds in JD.com and GDS reflect a growing optimism for the recovery in consumption and growth in AI demand. Despite geopolitical tensions and potential U.S. tariff risks, these funds are betting big on the long-term prospects of these Chinese companies. As the market continues to evolve, investors should stay informed about the latest trends and dynamics affecting these investments.