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David Tepper is growing even more bullish on Chinese stocks amid the nation’s new fiscal stimulus measures.
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The new measures include interest-rate cuts, liquidity support, and encouraging company stock buybacks.
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Tepper views China’s stock market as more attractive than the US stock market due to valuation differences.
It’s a buy “everything” moment for Chinese stocks after the country launched a fiscal stimulus bazooka this week, according to billionaire investor David Tepper.
In an interview with CNBC on Thursday, Tepper outlined his bull case for China’s stock market, which has been practically left for dead in recent months as it trades at the same level it did in 2007.
“I thought that what the Fed did last week would lead to China easing, and I didn’t know that they were going to bring out the big guns like they did,” Tepper said, referring to the Federal Reserve’s jumbo 50-basis point interest rate cut last week.
That big cut is giving China’s central bank some breathing room in implementing its own fiscal and monetary stimulus policies, according to Tepper.
In recent days, China has cut key interest rates, announced liquidity support for its stock market, lowered bank reserve requirements, and even encouraged company stock buybacks.
“Encouraging buybacks of stocks. Ok, this is China. This is stock buybacks. Not only encouraging it, lending you money to do it,” Tepper said.
He added: “I took it that they did a lot, they exceeded expectations, and he promised to do more and more and more, and that’s very strange language, especially for any central banker, but especially over there,” referring to recent dovish comments from People’s Bank of China governor Pan Gongsheng.
Chinese stocks have responded to the stimulus measures with big moves higher. On Thursday, shares of large-cap China tech stocks like Alibaba, PDD Holdings, and Tencent Holdings surged more than 7%.
Even the broader iShares MSCI China ETF soared 8% on THursday and is up more than 16% this week alone.
But Tepper believes Chinese stocks have plenty of room to run higher, even after the recent surges.
“Even with the recent moves they’re like on a flat-line low compared to where they have been in the past. And you’re sitting there with single multiple PEs, with double-digit growth rates for the big stocks that trade over here,” Tepper said.
As to whether steep tariffs from a potential Donald Trump Presidency would shake his bullish view on China, Tepper said it probably wouldn’t matter because of the “internal stimulus” measures.
“Obviously this is incredibly good for very undervalued Chinese equities, especially when the government is encouraging buybacks,” Tepper said.
On US markets, Tepper said he is not following his buy “everything” mantra with Chinese stocks and is being more selective in buying US stocks.
Tepper, who runs the $6 billion hedge fund Appaloosa Management, highlighted US casinos that have exposure to China, like Wynn Resorts and Las Vegas Sands, as well as companies that are exposed to the power demand of the AI tech trade as potential buys.
“I don’t love the US markets on a value standpoint, but I sure as heck won’t be short, because I’d be nervous as heck of the setup with easing money everywhere, a relatively good economy, and China just doing massive stimulus coming in, so it would make me nervous not to be somewhat long the US,” Tepper said.
He added: “You can’t be short the US.”
Tepper’s biggest position as of June 30 was Alibaba, which made up 12% of his portfolio. He hinted that he’s buying more of the stock.
“I have limits. I probably said a long time ago I don’t go above 10% or 15%, well 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 to how Tepper is hedging his bullish China trade, as some might expect a hedge fund to do, he’s not.
“My counter bet is that I don’t care,” Tepper said.
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