China’s party congress heightened policy risks that can push its stocks into a prolonged period of valuation compression, said a co-founder of a 22-year-old Asia-focused hedge fund firm.
Drawing analogies between China and Japan in the 1990s, Indus Capital Partners’ Byron Gill said the company’s $729 million Pacific Opportunities Fund began to cut its exposure to China equities in the first quarter of 2021 and has spent much of this year net-short the country.
"When you combine a step-change lower in the trajectory of economic growth with profound policy errors, you inevitably get multiple compressions in the equity market,” said the San Francisco-based co-founder of the firm that oversees $3.2 billion.