China debt: foreign investors cut Chinese bonds, dumped equities in July, IIF says
- Chinese debt witnessed outflows of around US$3 billion last month, according to the Institute of International Finance (IIF)
- If confirmed by official data, it would be the sixth consecutive month of foreign outflows from China’s US$20 trillion bond market
Foreign investors continued to cut holdings in Chinese bonds in July and dumped equities for the first time in four months, according to a report by the Institute of International Finance (IIF).
Chinese debt witnessed outflows of around US$3 billion last month, while US$6 billion exited other emerging markets, IIF estimated.
If confirmed by official data, it would be the sixth consecutive month of foreign outflows from China’s US$20 trillion bond market.
During the same period, China’s stock market witnessed US$3.5 billion of foreign outflows, compared with marginal inflows of US$2.5 billion in other emerging markets, IIF added.
The benchmark CSI 300 Index dropped by 7 per cent, down every week in July, as domestic coronavirus flare-ups, property woes and global recession risks weighed.
“China’s A-shares saw a rangebound, generally weaker trend since July under both domestic and overseas influences,” China International Capital Corporation said.
“For the coming months, several factors will influence flows dynamics, among these the timing of inflation peaking and the outlook for the Chinese economy will be in focus,” IIF said.
Overseas investors have been reducing holdings of Chinese bonds since February, as diverging monetary policies kept Chinese yields pinned below their US counterparts.
The People’s Bank of China has been easing policy to aid a virus-hit economy, while the US Federal Reserve has been hiking rates to fight soaring inflation.