Chinese stocks’ record foreign selling streak extends into fourth month amid doubts about mainland’s economic recovery

Overseas traders offloaded a combined 1.78 billion yuan (US$250 million) of yuan-denominated stocks in November, adding to the 127 billion yuan of net selling for the previous three months

Chinese stock trading by international investors is driven by macro issues, and a lot of people have stopped looking at corporate earnings, executive at Switzerland-based GAM Investment says

Reading Time:2 minutes

A large screen in Shanghai displays stock exchange data, in this file photo from August. Photo: EPA-EFE

Published: 5:30pm, 30 Nov 2023

Foreign investors pulled out of Chinese onshore stocks for a fourth straight month in November, extending a record exodus amid lack of conviction about the strength of recovery in the world’s second-largest economy.

Overseas traders offloaded a combined 1.78 billion yuan (US$250 million) of yuan-denominated stocks on mainland China’s bourses through the exchange link programme with Hong Kong, adding to the 127 billion yuan of net selling for the previous three months, according to Bloomberg data. The four months of outflows represent the longest such streak on record since the Shenzhen exchange was added to the cross-border investment scheme in December 2016.

The latest batch of economic data shows that China’s economic recovery is fragile and uneven. An official purchasing managers’ index indicated that the manufacturing industry shrank more than expected in November.

While industrial production and retail growth beat economists’ consensus projections in October, exports contracted for six months in a row and declines in property investments deepened. A high-stakes meeting between Presidents Xi Jinping and Joe Biden also did little to boost sentiment, with issues such as tariffs and restrictions on technology exports remaining unresolved.

“Chinese stock trading by international investors is driven by macro [issues], and a lot of people have stopped looking at corporate earnings,” said Jian Shi Cortesi, investment director at GAM Investment in Switzerland, which had US$74 billion in assets under management as of the end of September.

“Imagine if I’m a pension fund in the West and I have so many things to cover. Would I spend five hours to try to figure out about the Chinese property market? Probably not. During the downside, people make a quick conclusion that China is risky and they just stay away.”