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David Tepper is becoming even more bullish on Chinese stocks amid the country’s new fiscal stimulus measures.
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The new measures include interest rate cuts, liquidity support and encouraging company share buybacks.
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Tepper believes the Chinese stock market is more attractive than the US stock market due to valuation differences.
It’s a buy-it-all time 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 bullish position for China’s stock market, which has been all but presumed dead in recent months as it trades at the same level as it did in 2007.
“I thought what the Fed did last week would lead to an easing of China, and I didn’t know they were going to bring out the big guns like they did,” Tepper said, referring to the Fed’s massive 50 basis point plan. interest rate cut last week.
That big cut is giving China’s central bank breathing room to implement its own fiscal and monetary stimulus policies, according to Tepper.
In recent days, China has cut its key interest rates, announced liquidity support for its stock market, reduced bank reserve requirements and even encouraged share buybacks from companies.
“Encourage share buybacks. Well, this is China. It’s about share buybacks. Not just encourage them, but lend 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 that’s very strange language, especially for any central banker, but especially there,” referring to the recent dovish stance. comments from People’s Bank of China Governor Pan Gongsheng.
Chinese stocks have responded to stimulus measures with big moves higher. On Thursday, shares of large-cap Chinese technology companies such as Alibaba, PDD Holdings and Tencent Holdings rose 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 rise, even after recent rallies.
“Even with the recent moves, they are at a low level compared to the past. And you’re there with multiple and single PEs, with double-digit growth rates for the big stocks trading at over $100 million.” here,” Tepper said.
As to whether high tariffs under a potential Donald Trump presidency would alter his bullish view on China, Tepper said it probably wouldn’t matter because of the “domestic stimulus” measures.
“This is obviously incredibly good for very undervalued Chinese stocks, especially when the government is encouraging buybacks,” Tepper said.
In U.S. markets, Tepper said he is not following his mantra of buying “everything” in Chinese stocks and is being more selective in buying U.S. stocks.
Tepper, who runs the $6 billion hedge fund Appaloosa Management, highlighted as potential purchases U.S. casinos that have exposure to China, such as Wynn Resorts and Las Vegas Sands, as well as companies that are exposed to the country’s energy demand. artificial intelligence technology trading.
“I don’t like the US markets from a value point of view, but I’m sure I won’t go short, because I would be very nervous about the situation with monetary easing everywhere, a relatively good economy and China just doing what same”. “There’s a massive stimulus coming, so I would be nervous about not being a little late in the United States,” Tepper said.
And he added: “You can’t miss the United States.”
Tepper’s largest position as of June 30 was Alibaba, which represented 12% of his portfolio. He hinted that he is buying more shares.
“I have limits. I probably said a long time ago that 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, KraneShares China Internet ETF and JD.com.
As for how Tepper is hedging his bullish trade with China, as some might expect a hedge fund to do, he is not.
“My counter bet is that I don’t care,” Tepper said.
Read the original article on Business Insider