International investors are pumping more money into Chinese stocks even as local investors continue to focus on foreign markets and grow fearful of them.
Chinese equity funds saw net inflows of $16.6 billion in January, only the fourth time since those monthly inflows topped $10 billion, according to data from research firm EPFR Global.
That came after about $11 billion in net inflows in December 2021, the data showed.
“Investor interest in China really picked up in the last quarter of last year,” Cameron Brandt, director of research at EPFR Global, said in a phone interview.
The reason for this, Brandt explained, is the view, particularly from institutional investors, that emerging markets and especially China are a safe place this year.
Brandt said the latest wave of buying has come from institutions, not retail investors, whose interests in China have waned since early last year.
The mixed interest comes as global investment firms have turned positive in mainland Chinese stocks in the past several months. The upbeat calls also come despite concerns about regulatory uncertainty that could make these stocks uninvestable.
In the past 18 months, Beijing has cracked down on alleged monopolistic practices by Chinese internet companies and real estate developers’ heavy reliance on debt, among other issues. Sudden changes in economic policy have taken global investors by surprise.
Brandt explained that fund managers who manage diversified funds are less enthusiastic about China, as the average allocation to China decreased from 35% in the portfolio in the third quarter of 2020 to 27% as of January 1, while the funds allocated in India increased from 8.5% to 12.7%.
In turn, Jason Hsu, chairman and chief information officer at Rayliant Global Advisors, said in a phone interview that Chinese stocks have also turned “good” this year as the domestic market is entering a period of stimulus and easier policy as the US Federal Reserve embarks on a comeback. The monetary tightening cycle.