Foreign investors are abandoning China as capital inflows reverse

Foreign investors are abandoning China as capital inflows reverse
Chinese flag fluttering over Shanghai Street

Chinese flag flying over Shanghai.Leo Lecon / Getty Images

  • Foreign investors are abandoning China as the country’s post-COVID recovery fades.

  • They resumed dumping Chinese stocks and bonds after Beijing’s pledges to boost the economy briefly raised hopes.

  • Exchanges in Shanghai and Shenzhen witnessed nine consecutive days of outflows among foreign merchants.

Foreign investors are abandoning China as the economy’s post-COVID recovery continues to fade with little hope of relief from Beijing.

In recent weeks, global investors have resumed dumping Chinese stocks and bonds after briefly seeing inflows last month, when the government pledged more help for the economy.

Hong Kong’s Stock Connect trading scheme, which allows foreigners to trade shares listed on the mainland, saw 54 billion yuan ($7.4 billion) in net purchases after a July 24 promise from the Communist Party’s Politburo for support. but According to the Financial TimesThose gains are now almost gone.

In addition, stock exchanges in Shanghai and Shenzhen witnessed nine consecutive days of outflows among overseas traders, According to Bloomberg, and connect a standard line. During that period, foreign investors sold 46.2 billion yuan of mainland Chinese shares.

Meanwhile, foreign institutional investors dumped 37 billion yuan worth of Chinese bonds in July, according to data released Wednesday from China’s foreign exchange regulator.

While officials in Beijing raised hopes last month with optimistic talk of strong support, they failed to implement actual policies that point to expansive moves, and analysts don’t expect anything to emerge as the central government is seen as wary of adding too much debt. .

Recent weeks have also seen fresh signs that the Chinese economy is getting worse, with retail sales and industrial production slowing further and consumer prices slipping into deflationary territory.

Portfolio managers told the Financial Times that the pace of selling has picked up this month and is likely to accelerate further, even after the central bank’s surprise rate cut this week.

Pessimism among global investors translates to the Chinese equity gauge as well. The CSI 300 index of Shanghai and Shenzhen-listed shares almost gave back all of its 5.7% gains after the July Politburo meeting.

Meanwhile, the yuan has also felt the effects of the reversal and is down 2.4% against the dollar this month. This prompted Beijing to do so Pressure on state-run banks to intervene in the currency markets This week to support the yuan.

The recent influx of capital from global investors Pick up where you left off in the springas the weakness in the Chinese economy became evident after the recovery in the first quarter.

According to Reuters, foreigners sold $1.71 billion worth of shares on the mainland in May, exceeding the $659 million withdrawn in April.

After China ended COVID-19 restrictions in December, rising hopes for an economic recovery led to $25.05 billion in investment in the first five months of 2023.

This compares to $6.36 billion in all of 2022, Reuters reported. But the hopes that fueled massive investment this year have been dashed as growth continues to slow in a number of Chinese sectors.

In addition to the consumer and manufacturing sectors, the real estate market – which serves as the main store of wealth in the Chinese economy – is also getting worse. in July, New home prices in China fell for the second consecutive month And at a faster pace.

Read the original article at Business interested

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