Chinese stocks get ‘net underweight’ snub as economy misfires, while funds make Indonesia top bet: BofA survey

Name: Premier Li Qiang plays up China’s economic prospects at World Economic Forum’s ‘Summer Davos’
Uploaded: 2023-07-20T00:00:20.000Z
Duration: 1 min 49 s
Description: Premier Li Qiang plays up China’s economic prospects at World Economic Forum’s ‘Summer Davos’

Fund managers with US$257 billion of assets turn ‘net underweight’ in allocation for the first time this year amid economic wobbles, stimulus lag

Without policy tonic, more investors are bracing for Chinese stocks to undershoot the 11-year low last seen in October 2022

2-MIN READ2-MIN

A public screen displaying stock figures in Shanghai in June 2023. Photo: Bloomberg

Jiaxing Li

Published: 8:00am, 20 Jul 2023Updated: 12:03pm, 20 Jul 2023

Money managers in Asia are losing confidence in Chinese stocks, cutting their allocation to “net underweight” for the first time in 2023 as China’s post-pandemic recovery falters. A majority of them are bracing for the market to possibly slide below the 11-year low set in October.

Investors trimmed their allocation to minus 1 per cent in the latest monthly fund manager survey published by Bank of America (BofA). The percentage has progressively declined from a net overweight of 39 per cent in March, 27 per cent in April, 9 per cent in May and 5 per cent in June.

“Risk aversion [is] getting entrenched,” strategists at the US bank said in a report on July 18. “With one weak print after another, economic surprises in China have cratered, fuelling calls for more than marginal policy stimulus.”

01:49

Premier Li Qiang plays up China’s economic prospects at World Economic Forum’s ‘Summer Davos’

The MSCI China Index, which tracks over 700 companies listed at home and abroad, has been struggling for direction over the past three months with investors frustrated by Beijing’s slow-drip stimulus to overturn the pessimism. The index has lost 4.5 per cent this year, underperforming most markets in the region.

Some 145 fund managers in the region overseeing US$257 billion of assets participated in the survey from July 7 to 13.

While China’s second-quarter economic growth quickened to 6.3 per cent, it trailed market consensus and put the nation’s “about 5 per cent” target for 2023 at risk. In response, Wall Street banks including JPMorgan, Morgan Stanley and Citigroup trimmed their GDP forecasts.