More than three-quarters of the foreign money that flowed into China’s stock market in the first seven months of the year has left, reports the Financial Times of London. The paper said, reporting from Hong Kong that global investors “dumped” more than $25 bn worth of shares,” despite Beijing’s efforts to restore confidence in the world’s second-largest economy.”
The sharp selling in recent months puts net purchases by offshore investors on course for the smallest annual total since 2015, the first full year of the Stock Connect programme that links up markets in Hong Kong and mainland China.
Traders and analysts said a lack of forceful policy support from Chinese leaders had convinced global institutional investors to hold off on buying until growth rebounded enough to make China’s market competitive with others in the region.
“Japan’s on fire, India, Korea, Taiwan — that’s the problem,” the head of one investment bank trading desk in Hong Kong told the FT. “Right now the thinking is, ‘I don’t need to be in China, and if I am, it’s holding my portfolio back.’”
Global investors began 2023 buying Chinese stocks frenetically in January. They anticipated an economic rebound as the country came out of its “zero-Covid” regime.
Liquidity Crisis Concerns Arise
But foreign funds have forcefully sold down their positions in recent months in response to mounting concerns over a liquidity crisis in the property sector and disappointing growth readings.
Since touching a peak of $32.6bn in early August on government pledges to provide more substantial economic policy support, net foreign in flows to China’s stock market this year have tumbled 77 per cent, the FT surmised.
The FT reports, quoting estimates from Goldman Sachs, that financial institutions have instead favoured markets in India and South Korea with net inflows of $12.3bn and $6.4bn, respectively.
While equity strategists at Wall Street’s biggest investment banks have tipped China’s stock market to fare better in 2024, expectations for the size of those gains vary widely.