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Hedge Funds Dropping China Stocks For American Oil

As tensions rise between China and the United States over Taiwan, Goldman Sachs says it is seeing big money managers around the world dumping Chinese equities and moving money into American energy instead, Reuters reports.

Not only are Chinese equities being dropped in favor of American energy shares, but it’s being done at what Goldman calls a near-record pace.

"As concerns heightened around geopolitics, Chinese equities were net sold for the first time in a month, driven by risk unwinds with long sales outpacing short covers," Reuters cited Goldman Sachs as saying, noting that between April 7 and April 13, gross exposure to China shed 2.6%.

At the same time, the surprise oil production cuts by OPEC+ have rendered American energy shares far more attractive, with investors scooping up shares at a pace that has rarely been seen over the past five years.

Tensions continue to rise following an official U.S. meeting with Taiwanese counterparts earlier this month. China held war games last week in response to the meeting in the U.S. between U.S. House Speaker Kevin McCarthy and Taiwanese President Tsai Ing-wen. During those war games, Beijing simulated strikes against Taiwan. The U.S. responded in kind by sailing a warship through the Taiwan Strait on Sunday, referring to the move as a routine operation. 

Tensions could rise further following a G7 meeting on Sunday in Japan during which the Group of Seven wealthy nations–Japan, the U.S., the UK, France, Germany, Canada and Italy–stressed jointly rejected “unilateral attempts by China to change the status quo in the area by force”.

The statement prompted a harsh response from Chinese Foreign Ministry spokesman Wang Wenbin, who emphasized that Taiwan is an inalienable part of China and Beijing considers its reunification a top priority. 

By Charles Kennedy for Oilprice.com

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