HONG KONG — Singapore-based Asia Genesis Asset Management is liquidating its hedge fund after a "significant and unprecedented drawdown" following missteps in Chinese and Japanese bets.

The Asia Genesis Macro Fund lost 18.8 per cent in the first weeks of January, Chief Investment Officer Chua Soon Hock said in a letter to investors seen by Reuters. He said he decided to close the fund to prevent further loss and return money.

The fund, which hedge fund veteran Chua launched in 2020, manages about US$300 million (S$400 million).

Asia Genesis did not respond to a request for comment. A person close to the matter confirmed the decision.

The closure comes amid an unprecedented stock rout in China and sustained rally in Japan.

"We made big mistakes in the recent sharp Nikkei and Hong Kong moves which went in opposite directions," said Chua in the letter. "I have reached the stage whereby my confidence as a trader is lost."

The fund increased long positions in Hong Kong and China and was short in Japan, based on the prediction that China would outperform Japan this year after being sold off for the past three years, whereas Japan would be muted after a 30 per cent rally last year.

The fund's predicament was exacerbated by the absence of major economic stimulus in China including interest rate cuts, Chua said. China maintained rates on Monday (Jan 22).

Chua said he was disappointed by the "inconsistency of China policy makers not fighting against deflation, leading to continued loss of market confidence and prolonged bear market".

The Asia Genesis Macro Fund generated positive returns in 2020, 2021 and 2022, Asia Genesis' website showed. It gained 6.5 per cent in 2023 up to November, said a person familiar with the performance.

Chua previously ran a Japan macro fund which returned 18.7 per cent annually from 2000 through 2009.

Many long-term China bulls have been caught off-guard by the prolonged stock market decline.

In a Linkedin post in December, Chua said 2024 would be the beginning of a multi-year bull market for Chinese stocks.

However, Chinese markets started 2024 badly after a dismal 2023, with the blue-chip CSI 300 Index sinking to near five-year lows while Hong Kong's Hang Seng Index has been bouncing off new lows since 2022.

The Hang Seng Index has slumped more than 10 per cent so far this year versus a nine per cent gain in Japan's Nikkei 225.

Patchy economic growth and a renewed slump in home sales have redoubled investor resolve to steer clear of Chinese markets.

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Source: Reuters