Satellites and blogs: BlackRock to raise game in China stock picking

By Samuel Shen and John Ruwitch

SHANGHAI (Reuters) – To gain an investment edge in China, BlackRock Inc (N:), the world’s biggest asset manager, will map the country’s economic landscape using satellites, parse social media to take the market’s pulse and track reports in the ruling Communist Party’s newspaper, the People’s Daily.

The innovative measures, described in internal training materials seen by Reuters, take tailor-made investment analysis to a new level in China, where the firm is raising money for its China A-Share Opportunities Private Fund 1 amid growing competition.

Since Fidelity International in early 2017 became the first global asset manager to launch onshore funds in China, an increasing number of foreign money managers have won approval to launch products locally.

Earlier this month, global hedge fund managers Bridgewater Associates LP and Winton Group got the regulatory green light to launch private fund products in China, a market crowded with nearly 9,000 local competitors.

BlackRock’s China fund will use ‘big data’ and machine learning – a type of computer artificial intelligence – to analyse fundamentals, market sentiment and macroeconomic policies, according to materials distributed to salespeople.

The firm said it had registered its first China equity fund last month, but declined to provide details of its investment strategy when asked by Reuters.

While the data-scraping techniques BlackRock will deploy are increasingly prevalent in more mature markets, use of such technology to drive investment decisions is less popular in China.

Some Chinese hedge fund managers questioned the likely effectiveness of such a strategy.

“Weather it’s People’s Daily articles, or satellite images, or social media postings, I don’t think the data is big enough to generate profitable trading,” said Huang Can, a Shenzhen-based hedge fund manager who uses machine learning in high-frequency trading.

Xu Xiaoqing, managing director of Shanghai-based hedge fund house Preston Asset Management Co, said foreign investors needed to adapt to succeed.

“Foreign asset managers are not necessarily stronger than local players in terms of research and trading capabilities,” Xu said.

In a bid to capture opportunities driven by fundamentals, BlackRock said it would use satellite imagery to monitor industrial activity to better predict stock performance.

It would analyze Internet and blog postings to gauge the mood in a market where retail investors account for 80 percent of trading volume, it said.

And to try to sense policy shifts, which can affect markets, BlackRock said it would pore over the People’s Daily, the main newspaper of the ruling Communist Party.

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