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David Tepper is becoming even more bullish on Chinese stocks amid the country’s new fiscal stimulus.
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The new measures include interest rate cuts, liquidity support and encouraging share buybacks by companies.
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Tepper views the Chinese stock market as more attractive than the US stock market due to valuation differences.
It’s an “everything” buying opportunity for Chinese stocks after the country launched a fiscal stimulus bazooka this weeksaid billionaire investor David Tepper.
In an interview with CNBC on Thursday, Tepper laid out his bull case for the Chinese stock market, which has been virtually left for dead in recent months as it trades at levels similar to 2007.
“I thought what the Fed did last week would lead to easing by China, and I didn’t know they would bring in the big guns like they did,” Tepper said, referring to Federal Reserve policy. A huge interest rate cut of 50 basis points last week.
That large cut gives the Chinese central bank some breathing room as it implements its own fiscal and monetary stimulus policies, Tepper said.
In recent days, China has cut key interest rates, announced liquidity support for its stock market, lowered reserve requirements for banks and even encouraged stock buybacks by companies.
“Encouraging stock buybacks. OK, this is China. These are stock buybacks. Not only encouraging it, but lending you money to do it,” Tepper said.
He added: “I assumed they did a lot, they exceeded expectations, and he promised to do more and more and more, and that’s very foreign language, especially for any central banker, but especially there,” referring to recent dovish comments from Governor Pan Gongsheng of the People’s Bank of China.
Chinese stocks have responded to the stimulus measures with big gains. Shares of major Chinese technology stocks rose on Thursday Alibaba.com, PDD companiesAnd Tencent Holdings rose by more than 7%.
Even the wider one iShares MSCI China ETF rose 8% on Thursday and is up more than 16% this week alone.
But Tepper believes Chinese stocks have plenty of room to move higher, even after recent gains.
“Even with the recent moves, they are at a flat low compared to where they have been in the past. And then you have single, multiple PEs, with double-digit growth rates for the major stocks traded around the world. here,” Tepper said.
Asked whether the high tariffs of a potential Donald Trump presidency would shake his optimistic view of China, Tepper said it likely wouldn’t matter because of “internal incentives.”
“This is obviously incredibly good for highly undervalued Chinese stocks, especially when the government encourages buybacks,” Tepper said.
In U.S. markets, Tepper said he is not following his buy-it-all mantra with Chinese stocks and is more selective in buying U.S. stocks.
Tepper, who runs the $6 billion hedge fund Appaloosa Management, highlighted U.S. casinos that have exposure to China, such as Wynn Resorts And The Las Vegas Sandas well as companies exposed to the energy demand of AI technology trading as potential purchases.
“I don’t like the US markets from a value perspective, but I certainly won’t be shortchanged because the situation would make me nervous with money supply easing everywhere, a relatively good economy and China just doing it.” There are huge stimulus checks coming in, so it would make me nervous if I didn’t stay in the US for a long time,” Tepper said.
He added: “You can’t shortchange the US.”
Tepper’s largest position as of June 30 was Alibaba, which made up 12% of his portfolio. He hinted that he would buy more shares.
“I have limits. I probably said a long time ago that I don’t go above 10% or 15%, but that’s probably not true anymore,” Tepper said.
Tepper also owns shares of PDD Holdings, Baidu, the KraneShares China Internet ETF and JD.com.
As for how Tepper hedges his bullish China trades, as some would expect from a hedge fund, he doesn’t.
“My counter-bet is I don’t care,” Tepper said.
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