Hedge funds slash exposure to China amid ongoing regulatory crackdown

Hedge funds slash exposure to China amid ongoing regulatory crackdown

Hedge fund exposure to Chinese equities and indexes listed in the U.S. has dropped to a two-year low due to a sharp reduction in prices and selling of positions, according to a new client note by Credit Suisse. The firm showed a decline in so-called net exposure — a way of showing riskiness to swings in Chinese equities — from upwards of 2 percent at the end of last year to roughly 0.75 percent as of August 25. The move comes as one-third of hedge funds held ADRs at the end of the second quarter, according to a Goldman Sachs analysis of the latest 13F filings from 813 funds. ADR stands for American Depositary Receipt, which serve as proxies for shares of foreign companies that list in the U.S. A slew of regulatory actions have sent the average Chinese ADR plummeting. The government has largely focused its crackdown on areas like data security, for-profit education and gaming. President Xi Jinping is looking to encourage "common prosperity" by narrowing the wealth gap in China. The market has been responding to uncertainty about what this heightened regulation means for the private sector. The , which tracks companies listed in the U.S. that