EPFR Global has reported that investors are growingly cautious about Chinese stocks, particularly those listed overseas.
This increasingly cautiousness is seen mostly in the first quarter of 2022, which was hit by geopolitical tensions and growth concerns.
According to the data, the era closed with over $20 billion in net inflows to mainland Chinese stocks. However, the bulk happened in January 2022, and the purchasing pace dropped rapidly as the quarter progressed.
The first three months of 2022 witnessed rising concerns about the forceful delisting of Chinese stocks from the US markets following announcements from the US and Chinese securities regulators.
For Steven Shen, EPFR manager of quantitative strategies, “anything that relates to China we can find in causality and reasoning from either Russia or [the] US right now.”
EPFR announces that it monitors fund flows in $52 trillion in assets globally.
Environmental, Social, and Governance (ESG) investment flows
Chinese stock funds were concentrating on ESG inflows until the middle of February, when they started seeing outflows.
According to Shen, the world ESG stock funds witnessed “very consistent” inflows across the first three months of the year. Although, EPFR didn’t reveal the specific cause of the divergence.
Meanwhile, ESG-influenced concerns have driven other investment allocation adjustments.
On being cautious, Norges Bank Investment Management in this year’s first quarter revealed that it’d remove Li Ning shares, a Chinese sportswear firm, “due to unacceptable risk that the company contributes to serious human rights violations.”
The institution maintained that the Norwegian government told them to freeze Russia’s investments and make a plan to divest from Moscow.
Concerns about the growth
Shen said that Mainland Chinese stocks have increased in purchases at a big level not witnessed since January 2019.
Shen expressed that it happened when index firm MSCI included the mainland Chinese shares in a benchmark, forcing fund managers to track the index to purchase the mainland shares.
Despite the below-average domestic market sentiment, several investment banks turned positive on mainland Chinese stocks since the 2022 kick-off.
China has on Monday reported that the year’s first-quarter GDP climbed to 4.8% compared to 2021 as it tops 4.4% increase expectations.
The economic data for February and January exceeded expectations. And the ones released so far from March have been showing the effect of Covid lockdowns in the main economic cities like Shanghai.