Hedge Funds Unwind Positions in Asian Emerging Markets Amid Market Volatility

During the week of September 19–25, 2025, global hedge funds executed their largest weekly selloff in over five months in emerging Asian equities, as reported by Goldman Sachs. The primary driver behind this selloff was profit-taking, particularly in technology stocks, as investors aimed to reduce exposure ahead of significant regional holidays. Chinese equities, both onshore and offshore, experienced the most substantial declines, followed by Indian and Taiwanese stocks. The MSCI EM Asia Index declined by 1.6%, breaking a three-week winning streak. In response to market volatility, Chinese onshore investors significantly reduced leverage, with the Shanghai Composite recording its largest daily margin balance reduction since April 2025. Despite this pullback, emerging Asian equities have outperformed global markets in 2025, fueled by expectations of U.S. interest rate cuts and China's AI boom.
The significant selloff by hedge funds in emerging Asian equities reflects a cautious approach amid market volatility and upcoming regional holidays. Profit-taking, particularly in technology stocks, indicates concerns over potential market uncertainties. The reduction in leverage by Chinese onshore investors further underscores the cautious sentiment prevailing in the market. However, the strong performance of emerging Asian equities in 2025 suggests underlying optimism, driven by expectations of favorable economic conditions and technological advancements.
Looking ahead, investors will closely monitor developments in U.S. interest rate policies and China's AI sector, as these factors could influence the trajectory of emerging Asian markets. While short-term volatility may persist, the long-term outlook remains positive, supported by robust economic fundamentals and technological innovations.