Investing

Ray Dalio’s Bridgewater Firm Just Liquidated These 5 Chinese Stocks (and Bought 1)

Bret Kenwell

Published: August 16, 2022 8:20 pm

It’s 13F season, and as a result, we’re getting an updated look at what some of today’s best investors are doing, and outspoken China watcher Ray Dalio is selling Chinese stocks.

According to the 13F filing for Bridgewater Associates, the firm sold its entire position in Alibaba (US:BABA, HK:9988). It may seem no big deal, but it unloaded almost 7.5 million shares.

Alibaba was one of Dalio’s most prominent positions in the second quarter. It was lagging only a handful of ETFs, while the only individual stock position larger was Procter & Gamble (US:PG). Its Alibaba stake was valued at $813 million at the previous quarter’s 13F.

Shares of Alibaba bottomed in the first quarter, complete with a six-day, 69% rally from the March 15th low. While the stock ultimately climbed 71.7% to its second-quarter high in June, Alibaba stock has come under renewed pressure. The stock is now up “just” 28% from the March low and has been trending lower.

Every quarter, institutional investors must file Form 13F with the Securities and Exchange Commission (SEC). Who does this include? According to the SEC: “Institutional investment managers that use the United States mail (or other means or instrumentality of interstate commerce) in the course of their business and that exercise investment discretion over $100 million or more.”

Here’s the catch, though. These firms must file their Form 13F within 45 days of the end of the quarter. Naturally, many wait until near the end of the 45-day window to file, meaning these are snapshots of their holdings and adjustments roughly four to six weeks prior.

Anything could change in that large of a window. A fund could take a huge position in a stock going into the end of the prior quarter, then be ultimately out of it by the time the 13F comes out. Still, it’s an insightful way to get an idea of what the most significant funds and brightest investors are doing.

Other Sales: JD.com, BiliBili, NetEase, DiDi Global

Last year, Bridgewater launched a $1.25 billion fund for Chinese investments. It also significantly upped its holdings in many well-known Chinese stocks. From a macro perspective, however, the latest economic data out of China has not been all that inspiring. While Dalio has been bullish on China in the past, he saw the writing on the wall as the situation is not improving.

As for Alibaba, the company faced delisting fears from the SEC just last month. While the company has tried to smooth over the mess and reassure investors, the stock has struggled for upside traction. For U.S. investors, that fear isn’t just limited to Alibaba. Unfortunately, it is a country-wide issue as many other Chinese companies face potential delisting issues.

Delisting fears have been more than just a worry for some stocks too.

For instance, DiDi Global (US:DIDIY) was pressured to delist from the NYSE and is now relegated to trading over the counter (OTC). Many of these firms are feeling the heat since the Holding Foreign Companies Accountable Act of 2020 was passed and began being enforced in 2021. It states that “the U.S. can ban the trading of securities of companies whose auditors can’t be inspected by the American audit watchdog for three consecutive years.”

Bridgewater held 8.2 million shares of DiDi in the first quarter, but has emptied its position in the name as of the end of the second quarter.

It also dumped the 2.1 million shares it owned in JD.com (US:JD, HK:9618), the 1.1 million shares it had in Bili Bili (US:BILI, HK:9626) and the 370,125 shares it owned in NetEase (US:NTES, HK:9999).

Is Dalio Buying Anything in China?

As a matter of fact, yes. Bridgewater may have emptied some of its holdings in Chinese stocks, but not all of them.

The company maintained a stake in Tencent Music Entertainment Group (US:TME), where it holds 3.017 million shares. While that’s down slightly from the 3.11 million shares it owned in the prior quarter, it’s only a ~3% reduction.

Further, Bridgewater continues to increase its stake in Baidu (US:BIDU, HK:9888).

In the most recent quarter, Bridgewater held 1.143 million shares of Baidu, up about 1.5% from the 1.126 million shares it held at the end of the first quarter. While that’s only a modest increase, Dalio & Co. didn’t dump the stock as it did to its other Chinese holdings is a significant endorsement.

The firm increased its position in Baidu by 50% in the first quarter after adding in several consecutive previous quarters.

This article originally appeared on Fintel