Hedge fund managers throughout Asia lost money for their investors during a tumultuous 2018, according to data from AsiaHedge. Tracking the returns of all the fund managers listed in the AsiaHedge database the median return came back at a disappointing -6.6%.
Chinese equity long/short strategies were the poorest performers in 2018, with the average return -17.6%. By comparison the MSCI China Index stood at -18.9% by the end of December, while benchmark Shanghai Composite Index was down around 25%, making it the worst-performing major market in the world in 2018.
Yet, the Chinese government is talking up its markets with Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), saying that China’s stock market is “undervalued” at a conference in Beijing in mid-January. China is also doubling the quota for overseas investors in the country’s equities, opening the way for global funds to get a bigger bite of A-shares traded in China.
But, fears of continuing trade tension between China and the US continue to keep share prices muted. “The US-China trade war has introduced a lot of uncertainty in the market. Even if a trade deal is struck on 1 March, we believe markets will continue to be volatile in the mid to long term,” says Jennifer Wong, managing director at $3.6bn hedge fund manager PinPoint Asset Management.
Pan-regional funds, both including and excluding Japan, had identical negative performance with both
suffering an average loss of 14%. Many point to the aforementioned trade dispute as a major factor in weakening stock prices throughout the region.
The prior year’s top performer, Indian equities, which in 2017 saw fund managers return a staggering 37% on average, saw massive losses in 2018. The AsiaHedge Indian Long/Short Equity Index was down 14.7%, which would have been even worse if it wasn’t for a late rally that saw managers up 8% in the last two months of the year.
Indian managers then underperformed the Sensex benchmark which made positive returns in 2018, despite several months in the red as sources suggest that strong fundamentals in the Indian economy and falling commodity prices insulated the market.
In Australia, the decisive benchmark ASX 200 fell almost 7%, wiping $120bn from investors’ portfolios in 2018. It was a year that saw a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry reveal multiple cases of misconduct and markets slid into correction territory. Yet, comparatively, Australia-focused strategies fared better than most by losing 9.8%, though more than the ASX 200 which dropped 6.8% in 2018.
In Japan hedge fund managers weathered a brutal storm, which saw the Nikkei 225 fall into a bear market over Christmas, by limiting 2018’s losses to 7.87%. Analysts said that Japanese equities were being caught up in a global equity sell-off spurred by everything from concerns about the US-China trade war to central bank policy tightening. Yet, some maintain an upbeat mood on Japan. A recent Morgan Stanley research report argued that the pessimistic views on the country held by investors miss important signs of improvement in its macro and micro performance in recent years.
The point of no returns on AsiaHedge.