Global funds flee China’s stock market at the fastest quarterly pace in 15 months after making outsize profits for their portfolio
- Overseas investors have sold US$3.6 billion of Chinese stocks in the third quarter as the US election draws closer, Covid-19 dims growth outlook
- Mainland traders increase holdings of Hong Kong stocks for three quarters in a row this year
Consumer and technology stocks that have made spectacular run-up this year bore the brunt of the selling. China Tourism Group Duty Free, the nation’s biggest franchiser of duty-free shops, liquor distiller Wuliangye and Apple supplier GoerTek were among the stocks that were sold most by foreign investors, according to data by the Hong Kong exchange. Shares of the three companies have climbed at least 60 per cent this year.
“The US risk-off trade ahead of November’s US presidential election has affected onshore/offshore sentiment for Chinese equities, adding to the negative sentiment including a new wave of Covid-19 cases in parts of Europe and weakness in US high-frequency data,” said Wendy Liu, head of China strategy in Hong Kong at the Swiss bank UBS Group.
Mainland Chinese traders bought a total of HK$170.6 billion (US$22 billion) of Hong Kong stocks via the Connect programme in the July-to-September period, Bloomberg data showed. That followed the purchase of HK$71.7 billion and HK$228.3 billion respectively for the previous two quarters.
The Hang Seng Index is valued at 12.4 times estimated earnings, the cheapest among the world’s major market benchmarks. It dropped 4 per cent this quarter.
Chinese stocks “have high values of allocations in the global perspective,” said Min Liangchao, a strategist at HSBC Jintrust Fund Management in Shanghai. “China’s A-share market is relatively cheap in valuation and China is the one of the countries that are most successful in containing the epidemic and recovering economic growth.”
The Shanghai Composite Index rose 7.8 per cent in the third quarter and the ChiNext gauge of small-cap stocks gained 5.6 per cent, while the yuan appreciated 3.6 per cent against the US dollar during the period.