(Bloomberg) Hedge funds in China are facing forced sales of stock holdings as the market plunge triggers a mandatory liquidation of assets.The manager of a Chinese hedge fund that returned a surprising 86 percent during last year’s stock rout, Xinhong Investment, plans to sell all its stock holdings, Chairman Lu Weidong said in an interview. Hedge funds in China generally have agreements with investors spelling out mandatory liquidation levels if their holdings drop below a certain value, and as many as 30 percent of Chinese hedge funds may have reached those levels or are approaching them, Lu said.
“The selling pressure is huge,” Lu, whose firm oversees less than $3 million in assets, said on Thursday from his base in Dongguan in southern China. “They absolutely want to run.”
