(Bloomberg) -- Global macro hedge funds appear to be building bullish positions in Asian stocks, excluding Japan, before U.S.-China trade talks begin Thursday, according to Nomura Holdings Inc.
The funds may have started factoring in a scenario where the trade negotiations result in some sort of agreement favorable to China and Asian stocks, Nomura strategist Masanari Takada wrote in a note published on Oct. 7.
“We now see signs of an end to the decline in global equities,” he wrote. Hedge fund positions suggest they and other investors “may be expecting a furtherrally for Asian equity (ex-Japan),” the note said.
Hedge fund positioning also suggests that worries about U.S. equities could be fading, according to the note.
Other speculators including trading advisers have not followed the global macro hedge funds in their bullishness on Asian stocks, and a lot depends on how the trade war pans out, Takada wrote. The Trump administration placed eight Chinese technology giants on a U.S. blacklist yesterday, just two days before high-level trade talks.
“The recovery in sentiment could break significantly from the normal pattern if U.S.-China talks result in a partial agreement rather than a comprehensive one,” he wrote.
The MSCI’s broadest measure for Asia excluding Japan equities has so far risen 5% this year compared to 13% return in the MSCI World Index, according to data compiled by Bloomberg.
