What is going on here?
Bridgewater Associates’ China domestic funds shined in September this year, posting an impressive 19% gain thanks to the Chinese government’s strategic economic support, leading to strong gains in the stock market.
What does this mean?
Driven by the Chinese government’s aggressive policy changes to boost economic growth, Bridgewater’s RMB-denominated All Weather Plus Fifth Fund achieved an impressive year-to-date return of 31% through September. Outperformed local peer funds. While other multi-asset funds in the region had an average gain of just 6.6% in September and 1.6% for the year, Bridgewater’s success is largely due to its equity and fixed income investments. Meanwhile, the CSI300 index benefited from China’s extensive economic stimulus, posting its best monthly performance since December 2014, although changes in bond yields after policy announcements reflected market volatility.
Why should we care?
For the market: Betting on the Chinese government’s promises.
The Chinese government’s economic stimulus strategy, which includes measures such as lowering mortgage rates and easing bank reserve requirements, has revitalized domestic financial markets and increased interest in Chinese stocks and bonds. The outlook for these assets remains attractive as Bridgewater expects further policy easing, but there remains some caution regarding commodities amid weak construction activity.
The big picture: long-lasting stimulation.
China’s recent economic measures highlight a pivotal moment. This month’s gains are well in line with the government’s goals, but the sustainability of this economic recovery depends on further fiscal innovation. Buoyed by these dynamics, Bridgewater’s optimism reflects a nuanced view of China’s potential, weighing immediate benefits against the need for continued policy advancement.
