$188 billion exodus: Massive retreat of funds from Chinese stocks and bonds diminishes dragon's global clout
livemint.comChina’s economic slump due to years of Covid restrictions, a property market crisis, and persistent tensions with the West — concerns that have helped make the “avoid China" theme one of the biggest convictions among investors in Bank of America’s latest survey. Foreign fund participation in the Hong Kong stock market has dropped by more than a third since the end of 2020. “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.
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