A $188 billion exodus shows China’s heft fading in world markets
时间:2024-06-26 10:24:57 阅读(143)
A massive retreat of funds from Chinese stocks and bonds is diminishing the market’s clout in global portfolios and accelerating its decoupling from the rest of the world.
Foreign holdings of the nation’s equities and debt have fallen by about 1.37 trillion yuan ($188 billion), or 17%, from a December-2021 peak through the end of June this year, according to Bloomberg calculations based on the latest data from the central bank. That’s before onshore shares witnessed a record $12 billion outflow in August alone.
“Foreigners are just throwing in the towel,” said Zhikai Chen, head of Asia and global EM equities at BNP Paribas Asset Management. There’s anxiety about the property market and a slowdown in consumer spending, he said. “Disappointment on those fronts has led to a lot of foreign investors rethinking their exposure.”
While China’s weakness was once seen as dragging down the rest of the world, particularly the emerging-markets group, that has clearly not been the case this year. Down about 7% in 2023, the MSCI China Index is staring at a third straight year of losses that will mark the longest losing streak in over two decades. The broader MSCI Emerging Markets Index is up 3% as investors chase returns in other places like India and parts of Latin America.
The divergence comes as China’s bid to achieve self-sufficiency across supply chains and souring ties with the US have made other markets less susceptible to its ebbs and flows. In addition to the economic decoupling, another reason has been the artificial intelligence boom, which has boosted markets from the US to Taiwan while giving less of a lift to mainland shares. China’s weighting in the EM gauge has dropped to around 27% from more than 30% at the end of 2021.
At the same time, a strategy of stripping China out of emerging-market portfolios is fast gaining traction, with launches of equity funds that exclude China already reaching a record annual high in 2023.
“China risks are several – LGFV, housing stock overhang, demographics, dependency ratio, regulatory volatility, geopolitical isolation,” said Gaurav Pantankar, chief investment officer at MercedCERA, which oversees approximately $1.1 billion of assets in the US. “Investment opportunities within EM exist in various pockets.”
In the debt market, global investors have pulled about $26 billion from Chinese government bonds in 2023, while plowing a collective $62 billion into notes from the rest of emerging Asia, data compiled by Bloomberg show. Roughly half of the $250 billion-$300 billion inflow that accompanied China’s inclusion into government bond indexes since 2019 has been erased, according to an analysis by JPMorgan Chase & Co.
Selling pressure on the yuan has pushed the currency to a 16-year low versus the dollar. The central bank’s loose policy stance, in contrast to tightening in most major economies, is weakening the yuan and giving foreigners another reason to shun local assets.
In terms of corporate debt performance, China appears to have fully decoupled from the rest of Asia as a crisis in its real estate sector heads into its fourth year. The market has become more locally-held with approximately 85-90% owned by domestic investors.
All of this comes against the backdrop of China’s deteriorating economy, which has caused a rethink of the market’s allure as an investment destination. Wall Street banks including Citigroup Inc. and JPMorgan doubt whether Beijing’s 5% growth target for this year can be met.
Yet the gargantuan size of China’s economy and its key role in the manufacturing supply chain mean the market will remain a crucial part of portfolios for many investors, albeit to a lesser extent.
One channel through which China can still impact international financial markets is via globally traded commodities. Being the biggest importer of energy, metals and food, its influence extends beyond securities portfolios, creating ties to the global economy that are likely to prove more durable. The nation’s world-leading position in clean energy, from solar panels to electric vehicles, is one example of the expanded potential for trade as the world tries to meet its climate obligations.
“An economy which slows down doesn’t do so everywhere,” said Karine Hirn, partner at East Capital Asset Management. “We find good value in sectors with structural growth outlook, such as new energy vehicles, consumer-related and parts of renewables supply chain.”
The CSI 300 Index, a benchmark of onshore shares, fell 0.7% on Friday as foreigners sold even after data on retail sales and industrial production for August exceeded estimates. As the weakness persists, global funds’ positioning in China has already reached the lowest level since October, when the nation’s reopening from stringent Covid curbs sparked a sharp rebound over the next three months. In contrast, allocation to US equities — which have outperformed global peers this year — is rising.
For money managers like Xin-Yao Ng, investing in China requires a subtle balance of being wary of the structural challenges while seeking opportunities from individual stocks.
“I am structurally cautious about China’s long-term economic outlook, and conscious of fatter tail risks relating to geopolitics,” said Ng, an investment manager of Asian equities at abrdn Asia Ltd. “But China is still a very wide and deep universe with a lot of different opportunities. Broad valuation is very low now,” he said, adding that it’s an “interesting stock picking market” for fundamental investors.
猜你喜欢
- Tata Power, Reliance Industries, BEL, Zydus, Adani Enterprises, Axis Bank, NTPC stocks in focus
- F&O watch- Nifty support at 15,500-15,600; check Nifty 50, Bank Nifty trading strategies for weekly expiry day
- FII, DII data- FPIs sold shares worth Rs 1864 cr, DIIs bought shares worth Rs 521 cr on October 5, Thursday
- FII, DII data- FPIs sold shares worth Rs 1816 Cr, DIIs added shares worth Rs 1622 Cr on November 1, Wednesday
- Tata Motors partners with AndAnd Brand Partners to launch a New Year social media campaign
- FII, DII data- FPIs bought shares worth Rs 1165 cr, DIIs sold shares worth Rs 2134 cr on July 19, Wednesday
- Stocks, bonds fall as BOJ’s surprise policy shift spooks investors
- Tata Motors, ONGC, NHPC, Ashok Leyland among 147 stocks that hit 52-week highs; 18 touch 52-week lows
- Tata group stocks among top retail picks; industry outlook positive, valuations elevated but may hold