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Chinese authorities have restricted a key source of data on inward investment as global funds continue to pull money out of the country’s stock market, threatening to make 2024 the first year of equity outflows.
On Monday, daily data showing net investment flows from foreign funds into stocks in mainland China — so-called “northbound” trades from Hong Kong via the Stock Connect trading link — was no longer available. Information on foreign stock holdings will instead be available quarterly.
The move comes as international investors have pulled more than $12bn out of mainland Chinese equities since the start of June, according to Hong Kong stock exchange data, reversing earlier inflows that many analysts said were driven by the offshore arms of state-backed institutions, and taking year-to-date net flows into the red. There has never been a full year of net outflows since Stock Connect — which allows foreign investors access to China’s stock market — launched in 2014.
“While the data provided by global exchanges often vary, the lower transparency will not help attract foreign investment, especially in an emerging market,” said Gary Ng, senior economist at Natixis. “Investors may wonder why it is no longer offered and find it more challenging to justify entry into China and make investment decisions.”
The latest restrictions on investment data come as Beijing battles to shore up market confidence in the face of concerns about China’s slowing economy, and the impact of a slow-burning crisis in the country’s property sector. Chinese regulators had already cut off live trading data on foreign investors’ dealings in May.
The CSI 300 index of the top companies traded on the Shenzhen and Shanghai stock exchanges is down 1 per cent since the start of the year, as a rebound that began in late February fizzles out. By contrast, Wall Street’s S&P 500 is up 17 per cent and India’s Nifty 50 index has gained 13 per cent.
Chinese authorities have in the past restricted access to data that could be interpreted negatively. Last year, regulators stopped some fund houses from displaying the estimated net value of mutual funds. Beijing also stopped publishing youth unemployment data last year as the metric reached record highs.
Authorities have also tried to bolster markets by telling some domestic financial institutions not to be net sellers of stocks on certain days, via private instructions known as “window guidance”. The move has led to waning liquidity and lower trading volumes on the A-share market, analysts say.
“In the past two or three years, foreign investors have been a lot more tactical with China onshore buying,” said Jason Lui, head of Apac equity and derivative strategy, at BNP Paribas.
Lui said that while investors remained bullish on emerging markets such as India, they were increasingly excluding China from investments using “EM ex-China” benchmarks.
“If you maintain the current trajectory, we may have the first outflows [on a yearly basis from China A-shares] since inception,” he added.
Additional reporting by Cheng Leng in Hong Kong
https://www.ft.com/content/6e7a4129-d365-4905-8d9b-cc3f5ada5187
