Tudor, Caxton Like China

Chidem Kurdas

Big global macro funds stayed with China even as hedge fund people talked about a bubble in that country. Paul Tudor Jones’ Tudor Corp. and Bruce Kovner’s Caxton Associates held significant investments in Chinese companies as well as market indexes in the first quarter.

Both Tudor and Caxton used the ishares FTSE Xinhua China 25 Index Fund to get exposure to the fast-growing economy, which is also part of the broad emerging markets indexes bought by these hedge funds.

In addition, Caxton invested in China Petroleum & Chemical Corp., China Mobile – the world’s largest cell phone carrier – and China Life Insurance.

Tudor went for China Sky One Medical Inc., a pharmaceutical maker that reported a 15% increase in gross profit for the first quarter.

James Chanos, who famously short sold Enron, argues that there is a housing bubble in China. The Caxton and Tudor investments are not directly related to Chinese real estate, but if the property market slumped, the adverse effects would likely involve the entire economy.

The hedge finds could be hedging their bets by short selling China, possibly using derivatives. For another country, short selling the currency would be an obvious way to hedge against a bursting bubble.  But the Renminbi, China’s currency, is widely thought of as under-valued. It recently rose in response to the EU debt crisis.

Some fear that a Chinese slump could pull down global growth, starting with countries like Australia that export a lot to China.

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