By Summer Zhen
HONG KONG (Reuters) – Concentrated bets on popular Chinese e-commerce giant PDD Holdings may have led to billions of dollars in losses for hedge funds, as the shares crashed after downbeat comments from executives.
US-listed shares of PDD, the owner of discount retailer Temu, fell 33% this week and 30% in the third quarter.
IN NUMBERS
Global hedge funds held 102.8 million shares of PDD at the end of June, up from 91.7 million shares in the previous quarter, according to an estimate from WhaleWisdom, a website that tracks and analyzes quarterly U.S. 13F reports.
It’s unclear whether hedge funds have added to or reduced their investments since then, but Reuters calculations show that the 30% drop in PDD shares between late June and Aug. 29 would have wiped out a combined value of about $4 billion from those positions.
According to WhaleWisdom, some of Asia’s largest hedge funds, including billionaire Zhang Lei’s HHLR Advisors, Tairen Capital and Greenwoods Asset Management, were among the largest investors in PDD based on market value as of June 30.
Among global hedge fund giants, David Tepper’s Appaloosa Management owned 1.94 million shares of PDD, worth more than $250 million, at the end of the second quarter.
THE CONTEXT
PDD missed market estimates for quarterly revenue on Monday. During its earnings call, the company said revenue growth would be pressured by increased competition and external challenges, and that there were no plans for dividends or share buybacks.
WHY IT IS IMPORTANT
PDD is a top choice for many funds investing in China, as the budget product platform is one of the few companies in the country that is still achieving growth and expanding globally during the economic crisis.
The unexpected negative outlook, coupled with the drop in stock prices, has further dampened sentiment towards already struggling Chinese stocks, sending technology and consumer stocks lower.
MAIN QUOTE
“PDD was a crowd-long position for a large client base,” said Andy Maynard, global head of equities at China Renaissance Securities. “I’m sure the 30%-plus sell-off has been tough on all types of funds.”
“In terms of guidance, it was really bad… Overall, it will make some investors more pessimistic than ever, and it will probably mean that their portfolios are increasingly restricted to names that they trust, are transparent and can see future growth,” he said.
(Reporting by Summer Zhen; Editing by Vidya Ranganathan and Jamie Freed)
