BEIJING: Investors are investing billions of dollars more in US stock funds than Chinese stocks, according to fund research firm EPFR Global.
“It looks like the baton is being handed out,” Cameron Brandt, director of research at EPFR, said in an interview Friday. “Many investors think the short-term game is in the United States, where the stimulus is up against China, where there are signals that will be taken more cautiously, especially in the second half of the year.”
U.S. stocks plummeted in March 2020 as concerns about the impact of the coronavirus pandemic on economic growth took hold of markets. At that time, China was on track to control the internal spread of the virus and the economy returned to growth in the second quarter.
Now, about a year later, global investors are re-evaluating their outlook on the two countries.
Interest in U.S. and Chinese funds is growing
But in a global context, U.S. and Chinese stock markets are the two regions that have attracted the most inflows of international investors in the past two quarters, Brandt said.
“Both fund groups have seen a significant jump in interest since the middle of last year,” he said. “China’s funds made the initial leap, but the U.S. roared again.”
Net accumulated flows to U.S. stock market funds since early 2020 were negative through November, according to EPFR data. Flows turned positive in the weeks following the US presidential election and reached $ 170 billion in the week ended April 7th.
In contrast, Chinese stock markets saw positive net cumulative flows for much of last year that surpassed U.S. levels, through December. According to EPFR, the cumulative net flows of Chinese stock market funds in the week ending April 7 were only $ 29.78 million.
The data company is a subsidiary of Informa Financial Intelligence and aims to track more than 100,100 investment funds worldwide with more than $ 34 trillion in total assets.
China’s tickets are not finished
While U.S. equities have risen to new records this year, the Shanghai compound has changed little since December. Millions of new investors have piled up in the continental stock market last year amid rising local equities, prompting concern over excessive speculation.
In recent weeks, Chinese authorities have repeatedly warned of financial market risks.
Analysts have said that Beijing’s 6% GDP growth target for the year and other economic indicators indicate that instead of focusing on high-speed growth, policymakers intend to suppress long-term problems, such as debt dependency.
“We have seen that flows to China’s funds are declining recently,” Brandt said. “There seems to be some skepticism, although the stock’s growth figures look quite impressive compared to other places, China is still seen as vulnerable (if) hardened monetary conditions before the end of the year.” .
Still, he expects the funds to continue buying Chinese assets given the strong demand from retail investors since mid-last year.
History indicates that an extreme event would be needed to unearth this retail interest. Brandt said the last time there was such a large increase in retail buying, it didn’t end until in 2015 the mainland Chinese stock market crashed.
The Chinese government would also like to increase investor participation in the local stock market by facilitating corporate advertising and encouraging foreign institutions to invest.
– CNBC’s Yen Nee Lee contributed to this report.