May 27, 2024

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Foreign inflows to Chinese stocks down almost 80% from August peak

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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, with global investors dumping more than $25bn 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,” said the head of one investment bank trading desk in Hong Kong. “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 at a record pace in January, anticipating an economic rebound as the country abandoned its disruptive “zero-Covid” regime.

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 Rmb235bn ($32.6bn) in early August on government pledges to provide more substantial economic policy support, net foreign inflows to China’s stock market this year have tumbled 77 per cent to just Rmb54.7bn, according to Financial Times calculations based on data from Hong Kong’s Stock Connect.

Bruce Pang, chief economist for greater China at JLL, a real estate research and investment company, said Chinese authorities’ subsequent pledges to provide more…

2023-11-20 19:15:07

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