In this article, we discuss the 10 Chinese stocks hedge funds are selling amid crackdowns. If you want to skip our detailed analysis of these stocks, go directly to the Hedge Funds are Selling These 5 Chinese Stocks Amid Crackdowns.
The stocks of major China-based companies that trade on exchanges in the United States have taken a beating over the past few weeks amid an intensifying government crackdown against dual-listed firms by the Chinese government. This has caused a major investor exodus from Chinese stocks, resulting in a huge drop in the share prices and several ratings downgrades by reputable investment banks. Government data indicated that at the end of May this year around 248 Chinese firms worth $2.1 trillion in market capitalization were trading in the US.
Some of the top Chinese stocks trading on exchanges in the US include Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), Pinduoduo Inc. (NASDAQ:PDD), NIO Inc. (NYSE:NIO), and JD.com, Inc. (NASDAQ:JD), among others. The share prices of these firms have registered losses of 23%, 13%, 20%, and 21% respectively in the last three months, with only JD.com climbing close to 4% over the period. All these firms have had the price targets on their stocks lowered as well.
In late March, as the crackdown was just beginning, three of these top firms collectively lost $60 billion in market value in just three days, according to a report by news platform CNBC that used Refinitiv data for the purpose. In July, a statement by the State Council, the chief administrative authority in China, underlined that the overseas listing system for domestic enterprises was in the process of being updated. According to the body, this was being done to tighten restrictions on cross-border data flows and security.
The crackdown has already slowed down a slew of planned Chinese initial public offerings on the US market, with new companies hesitant about the impact of new policies on their operations. According to data from Renaissance Capital, 30 Chinese IPOs in the US last year had raised the most capital since 2014. This number has been expected to increase in 2021 before the crackdown. The technology sector, which comprises the majority of the market share of the dual-listed Chinese sector, has been hit hardest by the new developments. Even hedge funds have turned on these Chinese firms amid market uncertainty.
The tech-enabled disruption that has upended entire investment portfolios in recent years and even transformed the world of finance is facilitated by the Chinese firms on the US market, most of which deal in fintech and crypto products. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
With this context in mind, here is our list of the 10 Chinese stocks hedge funds are selling amid crackdowns. The main aim of this article is to acquaint readers with the Chinese companies that have suffered a dip in investments from hedge funds in the past few months.
The firms were selected using data from the 873 funds tracked by Insider Monkey. Only those that saw a decrease in the number of hedge fund holders in the second quarter, as compared to the first quarter of 2021, were picked. The list is compiled according to the number of hedge funds having stakes in each stock.
The basic business fundamentals and analyst ratings for each firm are also discussed to provide readers with some context so they can make more informed investment choices.
Hedge Funds are Selling These Chinese Stocks Amid Crackdowns
10. Adagene Inc. (NASDAQ:ADAG)
Number of Hedge Fund Holders in Q2: 7
Number of Hedge Fund Holders in Q1: 10
Adagene Inc. (NASDAQ:ADAG) is placed tenth on our list of 10 Chinese stocks hedge funds are selling amid crackdowns. The firm operates as a clinical stage biopharmaceutical firm focusing on the development and production of drugs for cancer treatment.
On June 24, investment advisory China Renaissance initiated coverage of Adagene Inc. (NASDAQ:ADAG) stock with a Buy rating and a price target of $40.57. Claire Wang, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 7 hedge funds in the database of Insider Monkey held stakes worth $13 million in Adagene Inc. (NASDAQ:ADAG), down from 10 in the previous quarter worth $18 million.
Just like Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), JD.com, Inc. (NASDAQ:JD), Pinduoduo Inc. (NASDAQ:PDD), and NIO Inc. (NYSE:NIO), Adagene Inc. (NASDAQ:ADAG) is one of the Chinese stocks affected by the government crackdowns.
9. 360 DigiTech, Inc. (NASDAQ:QFIN)
Number of Hedge Fund Holders in Q2: 14
Number of Hedge Fund Holders in Q1: 19
360 DigiTech, Inc. (NASDAQ:QFIN) is ranked ninth on our list of 10 Chinese stocks hedge funds are selling amid crackdowns. The firm owns and runs a digital consumer finance platform that provides finance products to borrowers funded by institutional partners.
On August 23, investment advisory Citi maintained a Buy rating on 360 DigiTech, Inc. (NASDAQ:QFIN) stock but lowered the price target to $24.99 from $43.67. The ratings update was issued by Judy Zhang, an analyst at the advisory.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm GLG Partners is a leading shareholder in 360 DigiTech, Inc. (NASDAQ:QFIN) with 516,372 shares worth more than $21 million.
Along with Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), JD.com, Inc. (NASDAQ:JD), Pinduoduo Inc. (NASDAQ:PDD), and NIO Inc. (NYSE:NIO), 360 DigiTech, Inc. (NASDAQ:QFIN) is one of the Chinese stocks feeling the heat from government crackdowns.
8. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders in Q2: 31
Number of Hedge Fund Holders in Q1: 33
KE Holdings Inc. (NYSE:BEKE) is a Beijing-based firm that owns and runs an integrated online and offline platform for housing transactions and services. It is placed eighth on our list of 10 Chinese stocks hedge funds are selling amid crackdowns.
On August 16, investment advisory Goldman Sachs downgraded KE Holdings Inc. (NYSE:BEKE) stock to Neutral from Buy and lowered the price target to $19.30 from $35, noting that there was “unpredictability” around the property market slowdown in China.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in KE Holdings Inc. (NYSE:BEKE) with 5.8 million shares worth more than $276 million.
In addition to Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), JD.com, Inc. (NASDAQ:JD), Pinduoduo Inc. (NASDAQ:PDD), and NIO Inc. (NYSE:NIO), KE Holdings Inc. (NYSE:BEKE) is one of the Chinese stocks suffering amid crackdowns.
7. Yum China Holdings, Inc. (NYSE:YUMC)
Number of Hedge Fund Holders in Q2: 32
Number of Hedge Fund Holders in Q1: 34
Yum China Holdings, Inc. (NYSE:YUMC) is a Shanghai-based company that owns and runs a string of franchise restaurants like KFC and Pizza Hut. It is ranked seventh on our list of 10 Chinese stocks hedge funds are selling amid crackdowns.
On September 15, investment advisory Macquarie downgraded Yum China Holdings, Inc. (NYSE:YUMC) stock to Underperform from Neutral and lowered the price target to $52.90 from $56, noting that the sales recovery of the firm would remain “bumpy” in the coming months.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm GuardCap Asset Management is a leading shareholder in Yum China Holdings, Inc. (NYSE:YUMC) with 6.9 million shares worth more than $460 million.
Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), JD.com, Inc. (NASDAQ:JD), Pinduoduo Inc. (NASDAQ:PDD), and NIO Inc. (NYSE:NIO) are some of the Chinese stocks in the US affected by crackdowns, alongside Yum China Holdings, Inc. (NYSE:YUMC).
6. Vipshop Holdings Limited (NYSE:VIPS)
Number of Hedge Fund Holders in Q2: 36
Number of Hedge Fund Holders in Q1: 54
Vipshop Holdings Limited (NYSE:VIPS) is placed sixth on our list of 10 Chinese stocks hedge funds are selling amid crackdowns. The company owns and runs an online discount detailer for various brands and operates from Guangzhou.
On September 3, investment advisory UBS downgraded Vipshop Holdings Limited (NYSE:VIPS) stock to Neutral from Buy and lowered the price target to $17 from $33, predicting that the revenue and user growth of the firm would slow down in the next few quarters.
At the end of the second quarter of 2021, 36 hedge funds in the database of Insider Monkey held stakes worth $1.30 billion in Vipshop Holdings Limited (NYSE:VIPS), down from 54 in the preceding quarter worth $1.34 billion.
Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), JD.com, Inc. (NASDAQ:JD), Pinduoduo Inc. (NASDAQ:PDD), and NIO Inc. (NYSE:NIO) are some of the Chinese stocks in the US affected by crackdowns, just like Vipshop Holdings Limited (NYSE:VIPS).
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Disclosure. None. Hedge Funds are Selling These 10 Chinese Stocks Amid Crackdowns is originally published on Insider Monkey.
