Hedge funds use DIY strategies to gauge coronavirus impact

Hedge funds use DIY strategies to gauge coronavirus impact

NEW YORK (Reuters) – As investors crunch numbers to determine how the coronavirus will hit China’s economy, hedge fund manager Nathaniel Polachek has tied much of his outlook to the fate of a ship anchored near Weihai, China.

The vessel carries some 750 tons of lead concentrate that Polachek, head of New York-based Commodity Asset Management, purchased in Greece to sell on the Chinese mainland.

The coronavirus outbreak has kept the ship idling off China’s coast for weeks, as movement restrictions and factory closures slow swathes of the world’s second-largest economy to a crawl.

Word that the ship has been allowed to dock in Weihai – an access point to one of China’s main industrial hubs and home to several metal refineries and smelters – would be one signal that business activity is finally picking up, Polachek said.

Another encouraging sign would be an increase in air pollution levels over key Chinese manufacturing areas, which Polachek monitors daily using the Air Quality Index web site.

“The best indicators are … from the physical world,” he said. “I want to see how long it takes for materials to get off the boat, how long it takes for me to get paid for them.”

Doubts over whether there are more cases in China than are being captured by official figures have fueled a do-it-yourself approach among investors looking to determine the outbreak’s trajectory and gauge its economic impact. The tools they use range from artificial intelligence and computer modeling to simple word of mouth.

Investors “don’t believe the stuff they’ve been hearing from the Chinese government,” said Leland Miller, head of China Beige Book International, which regularly surveys thousands of Chinese firms to gauge business conditions in the country.

Source: Reuters

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