China stock trading to stay ‘messy’, says hedge fund

China’s equity markets will remain “messy” in the coming months as the world’s second-largest economy adjusts its currency, according to Pierre Lagrange, co-founder of hedge fund GLG Partners and the chairman of Man Group’s Asian business.

“We still need to let the volatility play its course,” Mr Lagrange said yesterday.

“The equities we are focusing on are going to be hostage to what is happening with the currency. It’s still very messy.”

Turbulent trading in the Chinese yuan has heightened concerns that the country’s economy will slow and fuelled a 15% slump in the benchmark Shanghai Composite Index this year.

Man Group managed $76.8 billion (€70.4bn) at the end of September, of which $31bn was invested in its GLG funds that bet across asset classes.

It’s still too early to take a view on commodities such as oil, Mr Lagrange said, and he cautioned that investors could be focusing on supply while ignoring the potential of demand destruction.

Should the growth rate in China drop to 4%, “you probably reduce 30% to 40% of the additional demand for oil,” he said.

“This is not a climate where you have economic growth surprising on the upside,” Mr Lagrange said.