Tiger Global withdraws its investment in Chinese stocks

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Longtime Chinese investor Tiger Global Management has halted its investment in Chinese stocks, sources familiar with the matter said, as the company reassesses its exposure to the world’s second-largest economy after President Xi Jinping consolidated his control over the country.

Tiger leaders, including founder Charles “Chase” Coleman, have told others that Xi’s re-election and his stacking of the Communist Party leadership with loyalists at the party’s recent Congress could heighten geopolitical tensions and means the country’s zero-Covid policy will likely continue, the people said.

China’s determination to eradicate Covid-19 outbreaks with lockdowns and other restrictions has been a major drag on its economic growth. Concerns about what Beijing might try to do with Taiwan, a democratically self-governing island, have also grown after the Chinese Communist Party recently amended its charter to include the phrase “strongly oppose Taiwan independence” and raised a military commander familiar with Taiwan.

Tiger had reduced his exposure to Chinese stocks, focusing on a smaller set of companies he knew well and believed in, people familiar with the move said. High valuations at the start of 2021 also played a role, one of the people said.

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Tiger further reduced its hedge fund’s exposure to China to a mid-figure ahead of Congress, some people said, averting some of the carnage that hit Chinese stocks as a result. The Hang Seng Index in Hong Kong fell 6.4% on October 24, the biggest one-day drop since the 2008 global financial crisis.

Chinese companies’ US certificates of deposit plunged, with the five largest Chinese companies listed in the United States as of October 21 losing $52.17 billion in market value in one day.

Tiger held back from buying into the sell-off, with executives telling clients they were spending more time on opportunities in India and the South Pacific.

Investors reduced their exposure to China as a series of regulatory crackdowns on internet platform companies and for-profit education firms inflicted heavy losses on many funds and exposed the dangers of investing in an authoritarian state. But the recent congress has caused even long-time Chinese bulls to rethink their exposure.

Tiger wants clarity on issues such as how vigorously China will continue to grow and whether the country will invade Taiwan before investing new dollars in Chinese stocks, people familiar with the company said. Some could come from the Politburo Central Committee’s economic work conference in December, which sets the tone for the economic agenda for the coming year and is usually chaired by Xi.

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Coleman and others also said Xi should stimulate the economy to some extent, people familiar with the conversations said.

An early proponent of China, Tiger has earned billions investing in Chinese versions of American internet companies, helping to establish a reputation as a savvy tech investor. He invested in three publicly traded Chinese internet companies in 2002 and closed his first private equity fund, a $75.8 million vehicle, in 2004. One of the fund’s first investments was in Alibaba , which went public in 2014 in an IPO in New York.

The company’s most successful bet in China was a $200 million investment in e-commerce giant JD.com, which brought in $5 billion. Tiger was also an early investor in Didi and artificial intelligence company SenseTime, and left the two companies shortly after the IPO lock-up periods ended, according to people familiar with the issues. investments.

Losing bets include those from apartment provider Danke Apartment and tutoring firm Zuoyebang, according to a recent Tiger filing.

Tiger still retains significant exposure to China through several private equity funds, people familiar with the company said, but has slowed its new investments in private companies significantly since Beijing stepped up its regulatory crackdown on Internet platforms last summer. Its biggest private investments in China are Bytedance, the parent company of TikTok, and fast fashion retailer Shein.

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Tiger’s hedge fund has recently been one of the worst performers in the industry, wiping out years of gains in months and prompting the company to cut fees earlier this year. The hedge fund lost 7% last year and was down 52% this year through September. Its long-only fund fared less well. Tiger’s Chinese stock exposure contributed to the losses, people familiar with the company said, although to a lesser percentage extent than the rest of the portfolios. Tiger was managing about $60 billion company-wide as of September 30.

Tiger was a net seller of Chinese stocks for the year ended June 30, one of the people said, but Tiger also bought Chinese stocks as the market fell, a buy-down strategy that was had previously proven to be profitable. Tiger’s partner Edward Lei, who has focused on Tiger’s public investments in China for nearly a decade, left in June and is trying to raise money for his own global hedge fund.

Some of those familiar with Tiger said JD.com and food delivery company Meituan account for the bulk of Tiger’s remaining China exposure in his hedge fund.

—Eliot Brown contributed to this article.

Write to Juliet Chung at [email protected] and Jing Yang at [email protected]

This article was published by The Wall Street Journal, another publication of the Dow Jones Group

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