Foreign Inflows into Chinese Stocks Dropped as Investor Wariness Grew

 

Foreign investment in Chinese stocks shifted from inward to outward in November, according to Morgan Stanley (NYSE: MS). The shift ended two months of net inflows into Chinese stocks and underscored continued global cautious sentiment.

 

Specifically, Morgan Stanley reported that overseas funds saw outflows totaling $7.5 billion in November. Passive funds turned from $11.9 billion in inflows in October to $4.6 billion in outflows in November. Active funds accelerated their outflows, withdrawing $2.9 billion. Overall, cumulative inflows into passive overseas funds approached their peak; cumulative inflows into active funds plunged to a trough. Two contrasts highlight that overseas discretionary bets on Chinese equities declined.

 

Apart from fund comparisons, analysts also compared investment differences. Active managers allocated more assets to relatively stable or policy-supportive consumer services and capital goods but less to non-essential consumer goods and materials in the Portfolio. This contrast reflects doubts about China's resilient consumption and industrial need.

 

This skepticism manifests itself in the company's investments. AIA Group Ltd (HK: 1299) and Kweichow Moutai Co Ltd (SS: 600519) gained significantly; the positions of Alibaba (NYSE: BABA) (HK: 9988), JD.com (NASDAQ: JD) (HK: 9618) and ICBC (SS: 601398) slumped.

 

Nationally, Chinese investors indicated strength supported by November's $5 billion of passive funds inflows within China. Globally, short positions in offshore mainland and Hong Kong equities rose $1.7 billion, reflecting the accelerating bearishness.

 

Morgan Stanley concluded that though domestic sentiment remained elevated, global sentiment was hesitant about Chinese equities due to macroeconomic uncertainty.