Global investors abandon Chinese stocks in longest streak on record as growth concerns persist

Foreign traders have sold nearly 172 billion yuan (US$23.5 billion) of A shares in the past three months via the Stock Connect scheme

Investors are abandoning Chinese stocks to chase higher-yielding assets like the 10-year US Treasury whose yield hit a 16-year high of 5 per cent this month

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The CSI 300 Index declined nearly 4 per cent in October, with the sell-off by overseas traders showing no signs of slowing down. Photo: Shutterstock

Published: 2:21pm, 31 Oct 2023Updated: 3:46pm, 31 Oct 2023

Overseas investors continued to offload Chinese stocks for a record third consecutive month in October, amid jitters about the country’s wobbly economic outlook and capital flows to higher yielding assets.

Foreign traders dumped 4.75 billion yuan (US$649 million) of yuan-denominated stocks via the exchange link programme with Hong Kong on Tuesday, taking the net sales for the month to 44.8 billion yuan, according to Bloomberg data. With total outflows of 127 billion yuan in August and September, the three-month sell-off was the longest since December 2016, when the Shenzhen exchange joined the Stock Connect scheme.

The unrelenting sell-off underscores widespread concerns among global fund managers that China’s recovery may not be sustainable, as the downturn in the property market continues and consumption sputters after the release of pent-up demand for travel during the summer and the “golden week” holiday in October.

“The Chinese government appears willing to accept slower economic growth in order to prioritise structural changes within the economy, implying a shift in focus from rapid growth to long-term sustainability,” said Stephen Innes, a managing partner at SPI Asset Management in Bangkok. “Increasing geopolitical tensions can threaten China’s economic growth and hinder risk appetite.”

The allure of Chinese stocks has also waned, with the yield on 10-year US Treasury touching a 16-year high of 5 per cent during the month, spurring a flight to the fixed-income asset.

The CSI 300 Index declined 3.2 per cent in October, with some of its biggest members like Kweichow Moutai, Ping An Insurance and Contemporary Amperex Technology losing at least 5.9 per cent.