HFs Shift Away from Tech as China Stocks Experience Record Weekly Net Buying: GS

Hedge funds are shifting their investments away from sectors such as Information Technology, Energy, and Financials, towards Consumer Discretionary, Materials, and Consumer Staples, according to a recent report by Goldman Sachs.

The Energy sector, in particular, has experienced ongoing selling pressure, with hedge funds net selling U.S. Energy for five consecutive weeks, largely driven by short sales. This week marked the largest level of short selling in this sector in over five years, with short sales exceeding long purchases by a notable 6.4 to 1 ratio. As a consequence, Energy’s overall share of U.S. net exposure has decreased to 2.3%, down from a year-to-date peak of 3.3% in mid-August.

In contrast, the most significant regional movement has been observed in Asia, where both developed and emerging markets experienced the highest net buying activity in over a decade, led by China and Hong Kong. Goldman Sachs noted that Asia, comprising both developed and emerging markets, was the most net bought region in their Prime book this week, marking the largest net buying surge in ten years. This uptick was primarily driven by long purchases, with short covering contributing to a lesser extent.

The majority of the trading activity involved single stocks and macro products, with Chinese equities achieving their most significant weekly net buying in Goldman Sachs’ records. Hong Kong also witnessed considerable buying, albeit mainly focused on macro products rather than individual stocks.

The renewed interest in Asian equities follows China’s recent introduction of various measures aimed at addressing the broader economic slowdown. Chinese stocks continued to rise on Monday, positioning mainland equities for their best monthly performance in nearly a decade. Specifically, mainland benchmark indices opened the week on a high note after their strongest weekly performance in almost 16 years. The Shanghai Shenzhen CSI 300 blue-chip index increased by over 6.22%, while the Shanghai Composite Index climbed by 5.7%, and Hong Kong’s Hang Seng Index rose by 3.34%.