China's largest quantitative hedge funds, known for their success in beating the market through sophisticated statistical models, faced significant losses last month due to an oversight of a crucial factor: government intervention. This event, referred to as 'the quant quake', prompted a swift response from the Chinese government, which intervened by purchasing $45 billion worth of ETFs in the past two months, aiming to stabilize the market. This move is part of a broader effort to prop up the ailing stock market, with the government now owning approximately one-fifth of all equity ETFs and potentially increasing its purchases to $100 billion this year. In response to the market's volatility and the government's intervention, China's computer-driven 'quant' hedge funds, overseeing a $260 billion sector, are adjusting their strategies by enhancing risk management and aligning their portfolios with the state's definitions of fair play. This adjustment comes as regulators intensify their scrutiny, tightening regulations on listed firms and brokers to restore retail investor confidence and ensure the stability of the nation's $9.2 trillion stock market, as noted by EricBalchunas.
China’s markets regulator vowed to tighten listing requirements onshore and beef up checks on listed firms, in its latest effort to inject confidence in the nation’s $9.2 trillion stock market https://t.co/DzavMMfWVM
China securities regulator to tighten regulations on listed firms, brokers https://t.co/VtJGUrLP5e https://t.co/joatYdegzi
China's computer-driven ‘quant’ hedge funds are beefing up risk management and retooling their portfolios to conform to the state's definitions of fair play, as regulators clamp down on the $260 billion sector to revive retail investor confidence https://t.co/9G0CtAR61Y
China's 'quant' funds conform as regulators crack down after crash https://t.co/bx8JdVtmfJ https://t.co/lFby44OYMT
China's efforts to prop up its ailing stock market https://t.co/hX4g2in7uw
China's Quants run headlong into the stock market's "national team". Fascinating story: @wsj https://t.co/xxMXSHex4V
The Chinese government has gone Full BoJ, purchased $45b of ETFs in past 2mo to pump up market, already owns like 1/5 of all equity ETFs. They moved to buying small caps bc it moves stocks more. Purchases could reach $100b this year. Great note out today from @RebeccaSin_SK… https://t.co/VrgxchlpuJ
Here's How Some China Funds Recovered After the ‘Quant Quake’ https://t.co/ueLUJ1ZUqv via @markets
Here's how China funds dealt with the crisis that became known as “the quant quake” https://t.co/mDEhMq8vtl
"#China’s biggest quant funds beat the market for yrs by applying complicated statistical models to stock picking. But they didn’t model a key factor—the govt" Should go w/o saying, but algo models often don't work in 🇨🇳 markets w/o a policy overlay https://t.co/Lj7ak0TMEE
China’s biggest quant funds beat the market for years. But they lost billions last month overlooking a key factor: the government. via @soonweilun @RebeccaYFeng https://t.co/FewPf6nGC3