Across The Border | China fund inflows hit one-year high despite sluggish growth
Goldman Sachs says US$10b has been poured into Chinese equities this year, helped significantly by the Shanghai-Hong Kong Stock Connect
Despite muted interim earnings from Chinese companies, the China and Hong Kong stock markets recently recorded the largest fund inflows in more than a year, helped by the global “search for yield” and further relaxations in China’s capital markets, which more than offset the weakness of active fund inflows, against a backdrop of China’s sluggish growth momentum.
The MSCI China Index, a key China market investment index, has jumped 12 per cent since the Brexit vote on June 23, lifting the index’s year-to-date performance gains to 5 per cent.
That rally was “primarily on valuation expansion and fund inflows”, said Goldman Sachs analyst Si Fu in a research note on Wednesday.
Funds going into Hong Kong and China equities have hit US$10 billion since the start of the year, led by strong inflows from global exchange traded funds (EFTs) and southbound buying from mainland investors through the Shanghai-Hong Kong Stock Connect scheme, Fu said.
Active flows appear better linked with China fundamentals, with outflows moving with the slowing China growth momentum in tandem
In particular, during the week ending August 17, the mainland and Hong Kong equity markets recorded the largest weekly inflow since June 2015, around US$990 million, excluding local funds, according to recent statistics from EPFR Global.
