Global Funds Sell $3.1 Billion in China Stocks in October, Marking Third Consecutive Month of Major Outflows

Outflows largely due to regional funds' rebalancing, particularly European and US-domiciled funds; investors remain wary as China's economic recovery shows signs of faltering.

• Global funds sold $3.1 billion in Chinese equities in October, marking a third consecutive month of net selling exceeding $3 billion, despite efforts by China to boost its economy.
• Leading the outflows were European-domiciled funds, which have sold off about half of their holdings amassed since late 2020. There was also an accelerated outflow from US-based funds in October.
• Persistent outflows have led to foreign 'long-only' managers being their most underweight in China since 2018, as investors remain wary due to China's uncertain economic recovery.
• The MSCI China benchmark and the CSI 300 both declined in October, with key stocks sold off including JD.com, Xiaomi, and China Construction Bank.
• Despite the overall sell-off trend, there were added investments in internet giants like Alibaba and Baidu, as well as insurance firm AIA, while Goldman Sachs reported increasing hedge fund allocation to China, up to 8.5% at the end of October from 8.1% at the end of September.

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