Data shows first capital outflow since March; Asian bull trend at an end?
Goh Eng Yeow 23 June 2009
The foreigner’s love affair with China equities appears to have hit a rough patch.
Latest data from US bank Citigroup shows a net outflow of money from so-called ‘greater China’ funds last week. These are funds which buy into Hong Kong stocks, plus the H-shares of Chinese firms listed in Hong Kong as well as Taiwan equities.
Although the outflow is not alarming - a net US$91 million (S$133 million) between June 11 and 17 - it was the first time that overseas investors had withdrawn money from China equities since regional markets bottomed in March.
The turnaround has prompted some to question whether the outflow flags the end of the bull trend for Asian markets, which, over the past quarter, have been among the best world’s performing bourses.
As Citigroup strategist Elaine Chu noted, greater China funds used to get the ‘major share of the total net inflow into Asia’. In the past month alone, they attracted an average inflow of about US$100 million a week from foreign investors.
Greater China funds are not the only ones suffering from the reduced appetite of foreign investors.
Ms Chu noted that last week, the net cash flowing into emerging market equity funds dwindled to US$1.2 billion, from an average inflow of US$3.2 billion each week between April 30 and June 10.
Funds investing in mainland equities - currently the hottest-selling stocks -
also dropped markedly from an average weekly inflow of US$246.3 million in the past month to US$24.4 million last week.
Taiwan, too, is feeling the fallout from the waning of investor interest. Last week, foreigners’ inflow into funds investing in its equities fell by 71 per cent to US$32.9 million from a weekly inflow of US$112.2 million the month before.
And, with the waning appetite for China-linked stocks, the advance made by regional market indexes is looking precarious, given that some of them have gained 60 per cent in the past three months.
A Merrill Lynch poll of fund managers last week shows that while institutional investors continued to rank China as their favourite market, their ‘overweight’ positions on mainland equities was ‘dramatically reduced in June’.
This month’s emerging market fund managers’ country weighting for China is down by half to about 40 per cent from 80 per cent last month.
Since June 11, the Straits Times Index has fallen 4.8 per cent, while the FTSE ST China Index - which tracks S-chips - has lost 5.3 per cent. The Hang Seng Index has dropped 3.9 per cent, while the Hang Seng China Enterprise Index - which tracks H-shares - is down 4 per cent. Taiwan’s Taiex Index has shed 3.4 per cent over the past two weeks.
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Foreigners turn lukewarm on China stocks
Data shows first capital outflow since March; Asian bull trend at an end?
Goh Eng Yeow
23 June 2009
The foreigner’s love affair with China equities appears to have hit a rough patch.
Latest data from US bank Citigroup shows a net outflow of money from so-called ‘greater China’ funds last week. These are funds which buy into Hong Kong stocks, plus the H-shares of Chinese firms listed in Hong Kong as well as Taiwan equities.
Although the outflow is not alarming - a net US$91 million (S$133 million) between June 11 and 17 - it was the first time that overseas investors had withdrawn money from China equities since regional markets bottomed in March.
The turnaround has prompted some to question whether the outflow flags the end of the bull trend for Asian markets, which, over the past quarter, have been among the best world’s performing bourses.
As Citigroup strategist Elaine Chu noted, greater China funds used to get the ‘major share of the total net inflow into Asia’. In the past month alone, they attracted an average inflow of about US$100 million a week from foreign investors.
Greater China funds are not the only ones suffering from the reduced appetite of foreign investors.
Ms Chu noted that last week, the net cash flowing into emerging market equity funds dwindled to US$1.2 billion, from an average inflow of US$3.2 billion each week between April 30 and June 10.
Funds investing in mainland equities - currently the hottest-selling stocks -
also dropped markedly from an average weekly inflow of US$246.3 million in the past month to US$24.4 million last week.
Taiwan, too, is feeling the fallout from the waning of investor interest. Last week, foreigners’ inflow into funds investing in its equities fell by 71 per cent to US$32.9 million from a weekly inflow of US$112.2 million the month before.
And, with the waning appetite for China-linked stocks, the advance made by regional market indexes is looking precarious, given that some of them have gained 60 per cent in the past three months.
A Merrill Lynch poll of fund managers last week shows that while institutional investors continued to rank China as their favourite market, their ‘overweight’ positions on mainland equities was ‘dramatically reduced in June’.
This month’s emerging market fund managers’ country weighting for China is down by half to about 40 per cent from 80 per cent last month.
Since June 11, the Straits Times Index has fallen 4.8 per cent, while the FTSE ST China Index - which tracks S-chips - has lost 5.3 per cent. The Hang Seng Index has dropped 3.9 per cent, while the Hang Seng China Enterprise Index - which tracks H-shares - is down 4 per cent. Taiwan’s Taiex Index has shed 3.4 per cent over the past two weeks.
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