Chinese equity funds suffer nearly $2bn of outflows

Δημοσιεύθηκε: 3 Μαΐου 2015 - 01:40

Chinese equity funds have suffered nearly $2bn of outflows from international investors in the first three months of the year, putting the asset class on track to record its fifth straight year of net withdrawals.

The outflows, which have stemmed predominantly from cross-border funds domiciled in Europe but sold internationally, demonstrate a stark divide in sentiment towards the Chinese stock market.

China's mainland A-share market has surged 125 per cent in the past year, largely on the back of domestic retail demand for Chinese equities.

International investors have proved more circumspect, pulling $4.4bn from greater China equity funds in 2014 and another $1.8bn in the first quarter of this year, according to figures from Morningstar, the data provider.

Although many global fund managers believe the Chinese stock market can continue to climb, some are unconvinced.

Maarten-Jan Bakkum, senior emerging market strategist at NN Investment Partners, the Dutch fund house, argued Chinese investors had not paid enough attention to vulnerabilities in the country's financial system.

He said: "The sharp increase in Chinese stock markets in recent months demonstrates that citizen confidence in the Chinese government is not at issue. Prices soar with every indication that there are more stimulus measures to come.

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"While foreign investors exit the market, Chinese investors seem to ignore the risks that are bigger by the day. A government that loses control over the economy and makes major policy mistakes is simply not part of the Chinese collective memory."

However, Anne Richards, chief investment officer of Aberdeen Asset Management, Europe's largest listed fund house, believes pockets of value remain in some companies.

She said: "It is true that mainland Chinese stocks have had an exceptional run and can no longer be considered cheap. While a slowing China is a worry for everyone, policy makers there at least have the financial resources to cushion the economy from a so-called 'hard landing', as well as safely deflate any asset bubbles.

"If the authorities are successful, better quality companies with attractive corporate earnings, and hence portfolio investment opportunities, will result."

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