This US$100 mil hedge fund has shorted China stock futures

Trade talks between the United States and China has resulted in major market shifts and trends globally. (Reuters pic)

SEOUL: A US$100 million hedge fund is betting that the outcome of US-China trade talks won’t be positive enough to lift stocks on Monday.

“We shorted Chinese stock futures” on Friday, Jae Lee, chief executive officer at Timefolio Asset Management, a hedge fund with a China equity long-short strategy, said in a telephone interview from Singapore on Friday.

“If you want to see stocks rise on Monday, there needs to be news like cancellation of the tariffs.”

Lee, who declined to comment on returns of the fund as it was just launched in March, said the “National team” a group of state-related bodies that Chinese authorities lean on to buy stocks during times of turbulence won’t be able to support markets again on Monday.

The Shanghai Composite Index rebounded starting at 1:05 pm local time Friday, as Beijing took steps to stabilise the market after the US imposed additional tariffs on the nation’s goods.

June contracts on the S&P 500 Index fell as much as 1.2% on Monday in Asia after President Donald Trump’s administration has told China it has a month to seal a deal or face tariffs on all its exports to the US.

The People’s Daily, the flagship newspaper of China’s Communist Party, said the US should take full responsibility for trade-talk setbacks.

Trump also warned China on Saturday to “act now” to finish a trade deal, saying terms could get worse if it takes longer.

White House economic director Larry Kudlow said in an interview after the trade talks on Friday that China has invited US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin back to Beijing, although no date has been set so far.

While Lee sees a short-term correction for Chinese equities, he said the longer-term outlook could be positive given China’s stimulus measures for industries like automobiles and the property market.

He added that Trump may want negotiations with China again if the S&P 500 index falls more than 5%.

“It was indeed a memorable week,” he said. “Still, we see speculation rising that Trump may announce additional tariffs in the coming weeks too.”