David Tepper Increases His Exposure to China

Billionaire investor David Tepper doubled his bullish bets on China during the last quarter, investing more than a third of his capital positions in Chinese stocks. This remains a contrarian bet among hedge funds, which show weak interest in Chinese stocks.

Tepper, the founder of Appaloosa Management, who caused a stir in September with his call to buy “everything” in China, increased his stake in the e-commerce company JD.com by approximately 43% in the fourth quarter, according to documents released on Monday. He also increased his position in Alibaba by 18%. Alibaba remains Appaloosa’s largest position, representing about 16% of the portfolio worth $6.4 billion. His total exposure to Chinese stocks and exchange-traded funds (ETFs) was about 37% of his portfolio’s market value by the end of December.

Tepper’s unwavering confidence in Chinese stocks stands out among his fellow hedge fund managers. After buying Chinese stocks en masse in September, hedge funds quickly reduced their exposure to historically low levels due to a lack of follow-up actions from Beijing on stimulus measures.

According to Goldman Sachs’ primary brokerage services unit, allocations to China among hedge funds remain narrow, not far from five-year lows.

Morgan Stanley data shows a similar trend among foreign mutual funds, which continue to hold significantly reduced exposure to Chinese stocks.

The lack of interest indicates that foreign investors remain skeptical that Beijing will do what is necessary to revive the economy. The renewed trade war with the U.S. has further clouded their outlook.

However, some of the best opportunities arise when positions are lightened, and valuations are low. The pivot in September showed that Beijing’s pain threshold had been reached. Faced with decreasing local government budgets and rising social discontent, President Xi Jinping took steps to stabilize the economy and markets. U.S. tariffs remain a challenge for the Chinese economy but could also push Xi to take more decisive actions.

In other words, the Chinese market is like an option on Beijing’s policies—limited downside risk but great profit potential.

Tepper is known for making bold bets, like the one during the 2008 financial crisis, which brought him significant wealth. Time will tell whether his bet on China will pay off.

Important to know:

• The number of marriages in China fell by one-fifth to the lowest level in history last year, a serious blow to the government’s efforts to reverse the demographic crisis threatening the world’s second-largest economy.
• Consumer inflation in China accelerated for the first time since August, driven by increased household spending during the Lunar New Year holiday, though deflationary pressures persist.
• Fast-fashion giant Shein is asking some of its leading suppliers in China to build new production facilities in Vietnam, offering incentives such as higher purchase prices up to 30%, according to sources familiar with the matter.