Funds sell-off China stocks for lowest position in 11 months
A record selloff in Chinese stocks by global funds has pushed their positioning to the lowest since October, with money managers unswayed by the stimulus measures that have been coming through over the past few weeks.
The average underweight position by global long-only managers is back to where it was before the reopening rally took off in late 2022, according to a Morgan Stanley quant analysis. Foreign funds sold about 90 billion yuan ($12 billion) of mainland shares in August via the trading links with Hong Kong, the most in data compiled by Bloomberg going back to 2016.
Global funds were again in retreat Tuesday as a private survey showed China’s services sector cooling. That cut short a pickup in buying seen Monday, when the latest easing of mortgage rules aided sentiment. The Hang Seng China Enterprises Index slid as much as 2.2%, giving back some of its 3.2% gain in the previous session.
“Our latest positioning data shows that underweight China is a consensus among regional funds,” Morgan Stanley strategists led by Gilbert Wong wrote in a Sept. 4 note. “Net outflows from active long-only managers on China/HK equities doubled in August versus that in July.”
The recent volatility in Chinese equities underscores fragile sentiment. While Beijing’s stimulus drive has helped contain a rout, fundamental worries over the slowing economy and debt problems at developers are casting a pall over the longer-term outlook.
Yet for some money managers such as Luca Castoldi, the slump is an opportunity to build positions.
With the government following through its pledges to shore up the economy, “we are feeling confident in starting to add exposure to China,” particularly in technology and consumer discretionary shares,
Read more on investmentnews.com
