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Foreign investors flee China
Global asset managers have dumped Chinese onshore stocks at an unprecedented pace this month, which triggered a US$900 billion destruction of market value after a gloomy growth outlook, feeble stimulus, and unresolved geopolitical conflicts between the world’s two biggest economies convinced investors the rout is far from over.
Overseas investors have sold an aggregate of 77.9 billion yuan (US$10.7 billion) of stocks in the world’s second-largest equity market in 13 consecutive trading sessions through Wednesday via the northbound channel of the cross-border exchange link program with Hong Kong, according to Bloomberg data. The streak of sales is the longest since data compilation began in December 2016.
The bout of selling is the latest sign of the lack of confidence among foreign investors, who are fleeing on worries over China’s gloomy growth outlook. Top policymakers have refrained from introducing more forceful pro-growth packages after a late July Politburo meeting hinted at more policy easing. This flight has sent both the onshore and offshore yuan to their weakest levels against the US dollar since November, despite the intervention by China’s central bank.
“The cause is the concern about China’s policies and economy,” said Yang Qinqin, an analyst at China Fortune Securities. “Northbound capitals are the barometer of the A-share [onshore] market. A massive exodus will keep weighing on market sentiment and liquidity.”
Meanwhile, China’s recent moves to shore up growth and stocks have underwhelmed. The blue chip CSI 300 Index slumped to a nine-month low even after commercial lenders lowered the one-year loan prime rate and the securities regulator pledged to revive confidence by easing fundraising access for technology companies and encouraging more Chinese companies trading in the US to list in Hong Kong. Goldman Sachs cut the earnings growth forecast for the stocks on the MSCI China Index and the price target for the gauge earlier this week, citing the contagion risk from the beleaguered property market.
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01/09/2023