Michael Burry’s China stock portfolio could rise another 20%; Here’s why

As investors worldwide continue to watch his stock market moves attentively, Michael Burry, the man who famously bet against the housing market before the 2008 financial crash, might continue to make significant profits from his China stock holdings, taking into account a recent Wall Street prognosis.

Indeed, ‘The Big Short’ investor has been successful in his stock trading endeavors through his hedge fund, Scion Asset Management, and his China stock portfolio, including Alibaba (NYSE: BABA), Baidu (NASDAQ: BIDU), and JD.com (NASDAQ: JD), could be looking at another 20% increase. 

Goldman Sachs: Chinese stocks to rise 20%

As it happens, this scenario is in line with stock analysts at investment banking giant Goldman Sachs (NYSE: GS) upgrading their call on Chinese stocks to ‘overweight,’ joining the camp of optimists who have been highlighting the positive impact of Beijing’s recent stimulus on domestic companies.

Specifically, the nation’s stocks may rise another 15% – 20% if authorities deliver on their promised policy measures, and particularly if earnings improve and global investors’ positioning remains light, according to a recent note by Goldman Sachs’ team of equities strategists, including Tim Moe.

Furthermore, the experts, joining other Wall Street behemoths in their positive prognoses, have also explained that the Chinese government’s recent stimulus plans “have led the market to believe that policymakers have become more concerned about taking sufficient action to curtail left-tail growth risk.” 

In this context, Goldman lifted its target for the MSCI China Index to 84 and the benchmark CSI 300 Index to 4,600, suggesting a total return of 15% – 18% from the current levels, but also warned about potential problems, like a weaker fiscal stimulus drive, profit-taking, the United States elections, and tariff risks.

As a reminder, Burry increased his exposure to the above Chinese stocks this year, growing it to 45% of his entire portfolio while offloading significant positions in major American companies, including Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), and Oracle (NYSE: ORCL).

Meanwhile, JD stock alone has brought him immense advantage, considering it has advanced 83.19% over the past month, whereas BIDU shares have increased their price 35.32% during the same period, and BABA stocks have grown 40.63%, as per the latest charts on October 7.

Overall, Michael Burry’s bullish attitude toward Chinese stocks aligns with that of several Wall Street institutions. However, trends in the stock market, regardless of their geopolitical environment, can easily change, so doing one’s own research is critical when investing substantial amounts of money.