Graphic: China-focused equity funds see outflows for second month in August

IMAX China Holding

09/09/2021 14:43

By Gaurav Dogra and Patturaja  Murugaboopathy 
    Sept 9 (Reuters) - Global investors sold China-focused
equity funds for the second straight month in August on concerns
over a regulatory crackdown on local firms and the economic
impact of the Delta coronavirus variant.
    China-focused equity funds saw net sales worth $392 million,
following outflows of $596 million in July, data from Refinitiv
Lipper showed. 
    The data covers 2,840 China-focused funds run by overseas
fund managers.
    Investors in China have been rattled by a flurry of
regulatory crackdowns this year targeting sectors ranging from
technology to private tutoring, which have wiped out close to $1
trillion in market value since February.  urn:newsml:reuters.com:*:nL1N2Q40KQ
    "In the near term, the biggest concern is undoubtedly the
potential regulatory changes that are still expected to come.
Investors are anticipating what and where these changes will
be," said John Lau, the head of Asian equities at wealth manager
SEI. 
    "There will be continual volatility across the highly
anticipated areas, such as real estate, banking, health care,
e-commerce, but might also expand to other industries as well." 
     The UBS (Lux) Equity Fund China Opportunity (USD)
 LP68226738 , Aberdeen Standard SICAV I - China A Share Equity
Fund  LP68300718  and Xtrackers Harvest CSI 300 China A-Shares
ETF  ASHR.R  faced the biggest outflows, in excess of $200
million each last month, the data showed.
     As per a Morgan Stanley survey, Kweichow Moutai Co Ltd
 600519.SS , Contemporary Amperex Technology  300750.SZ  and
Midea Group  000333.SZ  were among the top 25 China A-shares
held by large offshore mutual funds. 
    The brokerage said global equity funds had been sellers of
Chinese and Hong Kong equities this year as there were better
and larger opportunities for them in U.S. equities. 
    "Therefore, any increase in uncertainties or unattractive
valuations could quickly induce risk-off sentiment among global
equity managers to rotate out from China HK equities," it said. 
    A deceleration in China's economic activity had also turned
investors bearish. Still, to some analysts, Chinese equities
look attractive after the recent sell-off.
    MSCI China's forward price-to-earnings ratio stood at 13.57
at the end of last month, close to the 14-month low of 13.52
reached in July.
    "For active managers, 2021’s general Chinese market
retrenchment has provided select opportunities," said Randy
Baron, lead portfolio manager at Pinnacle Advisors. 
    He said he had bought GDS Holdings  GDS.O  and IMAX China
 1970.HK  during last month's slide and expects to hold both for
three to five years.
    "If the Chinese government targets an additional broad
sector (as it did with education and then tech), we would
re-consider our bullish macro position."
    
    


    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Monthly flows into offshore Chinese equity funds    https://tmsnrt.rs/3DQXgwV
Breakdown by country for flows into China equity funds    https://tmsnrt.rs/3l2rrcd
Biggest outflows from China-focused equity funds    https://tmsnrt.rs/3jQdzSH
MSCI China index's PE ratio    https://tmsnrt.rs/3nd9NF2
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 (Reporting by Gaurav Dogra and Patturaja Murugaboopathy in
Bengaluru
Editing by Vidya Ranganathan and Mark Potter)
 ((gaurav.dogra@thomsonreuters.com; +91(080) 67496197;))