A clash erupted between two of the world's most prominent investors this week, reflecting a widening divide on Wall Street about the viability of putting money to work in China .
Fund managers have been cooling on the world's second-largest economy since president Xi Jinping launched a volley of regulatory stings against sectors ranging from education to video games over the past 10 months. The moves have wiped almost half the value off of a Goldman Sachs basket of US-listed Chinese stocks from a peak early in 2021 and halted the once vibrant flow of Chinese companies listing in NewYork.
But this week threw the disagreement into the open when BlackRock, the world's largest asset manager, announced on Wednesday it had raised $1bn for its first mutual fund in
China, seduced by the chance to tap into the country's growing savings market. Just a day earlier, billionaire financier George Soros wrote in the Wall Street Journal that BlackRock's move into China was a "tragic mistake".
"BlackRock's wrong," the famously outspoken 91-year-old former hedge fund manager said, having previously warned that investors in China face "a rude awakening" because "Xi regards all Chinese companies as instruments of a one-party state".
Managers running active global equity funds have chopped their allocations to China and Hong Kong to the lowest level in four years, according to Copley Fund research, a data provider. Looking at a sample of 381 funds with more than $1tn in assets, Copley calculated that just over a quarter now hold more Chinese and Hong Kong stocks than the benchmark global index. In early 2015, a peak of 45 per cent of investors held such outsized bets on China.
"You don't know what Chinese companies are being run for - profits or the government," said one London -based hedge fund manager. "There is no rule of law. Avoid China - or be an insider."
Cathie Wood, the chief executive of Ark Invest and one of the most closely watched investors, told an audience of institutional fund managers on Thursday that her fund has "dramatically" slashed its exposure to China since late last year.
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