A Sharp Reversal From Earlier Comments
On Monday, billionaire investor George Soros disclosed that his fund had opened positions in the biggest China-focused and emerging markets exchange-traded funds (ETFs).
Despite having predicted an imminent economic collapse in the Middle Kingdom, the 86-year-old investor is now switching gears, going bullish on the country’s economic prospects.
His fund bought 2.4 million shares in the iShares MSCI Emerging Markets ETF, and 633,059 shares in the iShares China Large-Cap. (Source: “George Soros Opens Stake in Largest China-Focused ETF,” The Wall Street Journal, November 14, 2016.)
This stands in contrast to Soros’ statements in April, when he said that China’s rampant credit growth was a harbinger of stressful times. By his account, what was happening in China “eerily resembles what happened during the financial crisis in the U.S. in 2007-08.”
His main contention was that Chinese banks were propping up toxic assets that would crumble if left in the wild. (Source: “Soros Says China’s Economy Looks Like the U.S. Before the Crisis,” Bloomberg, April 20, 2016.)
“Most of the money that banks are supplying is needed to keep bad debts and loss-making enterprises alive,” said Soros. “The problem has been deferred and it can be deferred for another year or two but it’s growing, and growing at an exponential rate.”
Analysts first discovered the shift in Soros’ portfolio while digging through his fund’s latest 13F filing with the Securities and Exchange Commission (SEC). It is a necessary document for all funds, with more than $100.0 million in assets under management. It shows what assets they own.
Soros is among a handful of celebrity investors who are closely watched because of their stellar records at making money. He was famously the “man who broke the Bank of England” by betting against the Pound Sterling in 1992.
His current holdings include a large stake in Barrick Gold Corporation (NYSE:ABX), which he increased by 1.8 million shares this quarter. At the same time, he closed a position in the World Gold Council’s ETF that had only been initiated in the first quarter of 2016.
Soros also started to unwind a heavy short position on the S&P 500.
Last quarter, he had 4 million “put” options which would gain in value if the S&P dropped, and 30,900 shares in an ETF that would appreciate if it went up. Now he only has 675,000 “put” options and 32,000 shares in the ETF, suggesting he grew more bullish in the interim.