David Tepper buys Chinese stocks as the country launches an economic stimulus bazooka

• David Tepper is even more optimistic about Chinese stocks given the country's new stimulus measures.
• The new measures include interest rate cuts, liquidity support and encouragement of share buybacks by companies.
• Tepper believes the Chinese stock market is more attractive than the US stock market due to valuation differences.

Billionaire investor David Tepper says it's time to buy “everything” in Chinese stocks after the country launched a fiscal stimulus package this week.

In an interview with CNBC on Thursday, Tepper outlined his optimistic views on China's stock market, which has been virtually wiped out in recent months and is currently trading at the same levels as in 2007.

“I thought what the Fed did last week was going to lead to monetary easing in China, and I didn't know they would bring out such big guns,” Tepper said, referring to the Federal Reserve's massive 50 basis point rate cut last week.

This sharp cut gives the Chinese central bank some leeway in implementing its own fiscal and monetary stimulus policies, says Tepper.

In recent days, China has cut key interest rates, announced liquidity support for the stock market, reduced reserve requirements for banks and even encouraged the buyback of corporate shares.

“Encouraging share buybacks. OK, that's China. These are share buybacks. It's not just about encouraging them, it's about lending you money to do them,” Tepper said.

He added: “I took it to mean that they have done a lot, they have exceeded expectations, and he has promised to do more and more, and that is very strange language, especially for any central banker, but especially over there,” referring to recent dovish comments by China's central bank governor Pan Gongsheng.

Chinese stocks responded to the stimulus measures with significant price increases. On Thursday, shares of major Chinese technology companies such as Alibaba, PDD Holdings and Tencent Holdings rose by more than 7%.

Even the broader iShares MSCI China ETF rose 8 percent on Thursday and has gained more than 16 percent this week alone.

However, Tepper believes that Chinese stocks still have plenty of room to rise even after recent price increases.

“Even with the recent price movements, they are at a stagnant low compared to what they were before. And you're sitting there with a P/E ratio of just one percent, with double-digit growth rates for the big stocks that are traded here,” Tepper said.

When asked whether high tariffs in the event of a possible Donald Trump presidency would shake his optimistic assessment of China, Tepper replied that this would probably not matter because of the “internal stimulus measures”.

“This is of course incredibly good for severely undervalued Chinese stocks, especially if the government encourages buybacks,” Tepper said.

Regarding the U.S. markets, Tepper said he is not following his “buy everything” mantra when it comes to Chinese stocks and is being more selective when buying U.S. stocks.

Tepper, who runs the $6 billion hedge fund Appaloosa Management, highlighted U.S. casinos with exposure to China, such as Wynn Resorts and Las Vegas Sands, as well as companies exposed to the energy needs of the AI ​​technology industry as potential buys.

“I'm not a huge fan of the U.S. markets in terms of value, but I'm certainly not going to go short because the situation with monetary easing happening everywhere, a relatively good economy and massive stimulus in China would make me pretty darn nervous. So it would make me nervous not to go somewhat long in the U.S.,” Tepper said.

He added: “In the United States, you can’t go short.”

Tepper's largest position as of June 30 was Alibaba, which made up 12 percent of his portfolio. He indicated that he will buy more shares.

“I have limits. I probably said a long time ago that I wouldn't go above 10 or 15 percent, but that's probably not true anymore,” Tepper said.

Tepper also owns shares in PDD Holdings, Baidu, the KraneShares China Internet ETF and JD.com.

When asked how Tepper hedges his optimistic China trade, he does not answer – some would expect it from a hedge fund.

“I bet I don’t care,” Tepper said.