Weekly Update

Hedge funds turned bullish on yen prior to biggest drop in 15 years

Hedge funds shifted to a bullish stance on the yen just before dovish comments from Japan’s new prime minister and strong US employment data triggered the worst weekly decline for the currency since late 2009, according to a report by Bloomberg.

The report cites data from the Commodity Futures Trading Commission (CFTC) for the week ending 1 October as revealing that speculative investors moved to a net long position on the yen for the first time since mid-August, with the buying spree coming just before Prime Minister Shigeru Ishiba stated that Japan was not yet ready for further interest rate hikes.

Additionally, a robust US non-farm payrolls report, which came in higher than all estimates, bolstered demand for the dollar, leading markets to reduce expectations for a significant Federal Reserve rate cut next month.

The yen tumbled 4.4% against the dollar last week – the steepest loss since December 2009 – as the surprising jobs report and Ishiba’s remarks forced investors to rethink the yen’s trajectory. In response, many investors, including hedge funds, have resumed short bets against the yen, reflecting a growing bearish sentiment on the currency.

Activist investor Starboard forges $1bn stake in Pfizer to swing profits

Activist investor Starboard Value has reportedly acquired a $1 billion stake in Pfizer, aiming to reverse the drugmaker’s declining share price, according to a new report.

The U.S. hedge fund has approached former Pfizer CEO Ian Read and recent CFO Frank D’Amelio to help steer the company toward profitability in the post-pandemic era, as first reported by the Wall Street Journal. Although Pfizer experienced record profits in 2022 due to the success of its Covid-19 mRNA vaccine, the company's shares have steadily declined as demand for Covid-related products waned. Pfizer's stock is now down nearly 54% from its peak in December 2021 during the height of the pandemic, with a current market capitalization of $162 billion.

While Starboard's specific plans for Pfizer remain unclear, its $1 billion stake represents about 0.6% of the company's total value. When approached for comment by Pharmaceutical Technology, a Pfizer spokesperson declined to confirm the investment, stating that the company does not comment on market speculation or rumors.

Activist investors, like Starboard, typically acquire significant stakes in publicly traded companies to influence their strategy and operations, with the goal of boosting the company’s share price and improving overall performance.

China-focused hedge funds post explosive September returns

Reuters is reporting several China-focused hedge funds posted strong returns in September, driven by a sharp rebound in Chinese stocks following Beijing’s aggressive stimulus measures. China's blue-chip CSI 300 Index surged 25% in five days, making Asian equity hedge funds top global performers for the year.

Hong Kong-based Triata Capital saw a 44% return last month, boosting its year-to-date performance to 56%, thanks to investments in sectors like data centers and e-commerce. Yunqi Capital's China Fund gained 26%, fueled by U.S.-listed Chinese internet and fintech stocks like Lufax and Qifu Technology.

This recovery comes after three years of underperformance, as China’s government launched its largest post-pandemic stimulus, including interest rate cuts and a $114 billion package to support share prices. The MSCI China Index rose 24% in September, its biggest gain since November 2022.

Goldman Sachs estimated that China-focused hedge funds returned 6% in the final week of September, marking their best weekly performance ever. Despite these gains, analysts expect broader recovery and investment in Chinese hedge funds to ramp up in early to mid-2025, depending on economic stabilization.