BEIJING – Investors are investing billions of dollars more in US funds than Chinese funds, according to data provided by fund research firm EPFR Global.
“The wand appears to have been handed over,” Cameron Brandt, research director at EPFR, said in an interview on Friday. “Many investors believe that the short-term game is the US, where the stimulus is growing, compared to China, where there are signals that will be taken more cautiously, especially in the second half of the year.”
US stocks declined in March 2020, as concerns about the impact of the coronavirus pandemic on economic growth swept through the markets. At that time, China was about 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 prospects for both countries.
Interest in US and Chinese funds is skyrocketing
But in a global context, US and Chinese equity funds are the two regions that have attracted the most inflows from international investors in the last two quarters, Brandt said.
“Both groups of funds have seen a significant increase in interest since the middle of last year,” he said. “Chinese funds made the initial leap, but the United States has returned with a bang.”
Cumulative net flows to US stock funds since the beginning of 2020 were negative until November, according to EPFR data. Flows turned positive in the weeks leading up to the US presidential election and reached $ 170 billion in the week ending April 7.
In contrast, Chinese stock market funds registered net positive flows for much of last year, which exceeded US levels – until December. Cumulative net flows to Chinese equity funds in the week ended April 7 were only $ 29.78 billion, according to EPFR.
The data company is a subsidiary of Informa Financial Intelligence and claims to track more than 100,100 investment funds worldwide, with assets of over $ 34 trillion.
It’s not over for the Chinese entries
While US stocks have reached new records this year, the Shanghai composite has changed little since December. Millions of new investors flocked to the mainland stock market last year amid rising local stocks, which has raised concerns about excessive speculation.
In recent weeks, Chinese authorities have repeatedly warned of financial market risks.
Analysts said the GDP growth target of 6% of GDP for that year and other economic indicators indicate that rather than focusing on high-speed growth, policymakers intend to tackle the problems in the long run. such as high debt dependence.
“We’ve seen flows to Chinese funds declining recently,” Brandt said. “There seems to be some skepticism, even though the number of securities growth seems quite impressive compared to everywhere, China is still considered vulnerable (if) monetary conditions tighten before the end of the year.”
However, he expects the funds to continue to buy Chinese assets, given the strong demand from retail investors since the middle of last year.
History indicates that an extreme event would be needed to affect retail interest. Brandt said the last time such an increase in retail purchases was recorded, it did not end until the mainland Chinese stock market collapsed in 2015.
The Chinese government would also like to stimulate investor participation in the local stock market, facilitating companies’ access to the stock market and encouraging foreign institutions to invest.
– Yen Nee Lee of CNBC contributed to this report.