Foreign funds accelerated China equity sell-off in December -Morgan Stanley

NetEase

03/01/2024 07:58

By Summer Zhen
       HONG KONG, Jan 3 (Reuters) - Global long-only funds
offloaded China equities at the fastest pace of 2023 in December
as they rushed to meet redemption requests and to diversify away
from the world's second-largest economy, according to Morgan
Stanley analysts. 
    China and Hong Kong equities saw a combined net outflow of
$3.8 billion from active long-only managers last month, the
worst month in 2023 and the third-largest monthly outflow on
record, Morgan Stanley's quantitative research team said in a
report released to clients on Tuesday.
    "Both investors' redemptions from equity funds and portfolio
managers' rebalancing to deepen underweight on China contributed
to the outflows," the analysts led by Gilbert Wong said. 
    China and Hong Kong stocks ended 2023 as the worst
performers among the world's major indexes, dragged down by
geopolitical risks, a sluggish economic recovery and policy
uncertainties.
    China benchmark blue-chip CSI300 Index  .CSI300  slumped 11%
in 2023 while Hong Kong's Hang Seng Index  .HIS  tumbled 14%. 
    While Beijing rolled out a raft of measures aimed at
boosting the economy in recent months, analysts have said the
moves are not sufficient to restore market confidence. 
    Morgan Stanley says European fund managers were "catching up
to align their underweight on China" with their U.S. peers.
    Of the $3.8 billion outflow in December, $2 billion was
attributable to investor redemptions from funds, while the rest
was driven by fund managers rebalancing out of the country, the
investment bank said. 
    In 2023, Tencent Holdings  0700.HK , Alibaba Group Holdings
 BABA.K   9988.HK , Kweichow Moutai  600519.SS  and Netease
 NTES.O   9999.HK  topped the weight additions list, while
JD.com  JD.O   9618.HK , Yum China Holdings  9987.HK  and AIA
 1299.HK  were the most sold, according to Morgan Stanley. 
    Long-short equity funds, in contrast with their long-only
counterparts, appear to have seen more value in Chinese stocks
in December.
    UBS' prime brokerage team said China equities were well
bought by hedge funds over the final few weeks of 2023 because
they were betting on a stimulus surprise and actively bought the
dips. 

 (Reporting by Summer Zhen; Editing by Jamie Freed)
 ((summer.zhen@thomsonreuters.com; 852-3462-7739;))