(Bloomberg) — Michael Burry, the hedge fund manager known for his 2008 bet against the U.S. housing market, further increased his exposure to Chinese stocks including Alibaba Group Holdings Ltd. in the third quarter as Beijing rolled out a stimulus package. added new bearish options that would provide downside protection.
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Scion Asset Management, Burry’s investment firm, increased its holdings in Alibaba by nearly 30% to 200,000 shares during the quarter. At the same time, Scion bought put options with a notional value equal to 84% of its Alibaba holdings, according to a 13F filing on Thursday. The put options allow Scion to sell the shares to make a profit or limit losses if Alibaba collapses.
Burry’s firm used the same tactics for two other Chinese investments, Baidu Inc. and JD.com Inc., in a sign of caution about its Chinese interests.
The reshuffles came as Beijing steps up efforts to revive growth with pledges to support budget spending and the country’s troubled real estate market in September. The surprise stimulus plan sparked a frenetic rally in Chinese stocks, but some market observers remain cautious about the long-term prospects for the sector.
For JD.com Inc. Scion doubled its stakes in the three months through September, while adding bearish bets against its stock positions, the filings show. In Baidu. Inc. the company increased its position by two-thirds, but also hedged its risk.
The three Chinese stocks, including Alibaba, were worth $54 million at the end of September, representing about 65% of Burry’s total shareholdings, data show.
Burry, along with Appaloosa Management’s David Tepper, was one of the few prominent Chinese stock bulls among hedge fund investors even before Beijing’s big policy shift in September. He jumped into Chinese stocks in the first quarter, more than doubling his stake in Alibaba, then increased that position further in the second quarter to make it the company’s top holding as of June 30.
Read: Michael Burry increases stake in Alibaba and halves stock portfolio
Since Beijing’s stimulus measures in late September, the country’s stock benchmark, the CSI 300 Index, rose 32% in two weeks, while US-listed Chinese shares of the Nasdaq Golden Dragon Index rose about 37%.
The rally has since peeled off. Alibaba, JD.com and Baidu have all lost more than 20% since their peaks in early October, retreating to the levels where Beijing announced stimulus measures in late September.
