BEIJING – According to data from fund research firm EPFR Global, investors are putting billions of dollars more into US equity funds than Chinese.
“The baton appears to be passing,” Cameron Brandt, research director at EPFR, said in an interview Friday. “Many investors think the short-term game is the US, where stimulus is increasing, versus China, where there are signs of a more cautious approach, especially in the second half of the year.”
US stocks plummeted in March 2020 as markets were concerned about the impact of the coronavirus pandemic on economic growth. By then, China was on track to contain the virus’s domestic spread and the economy was growing again in the second quarter.
Now, about a year later, global investors are reviewing their outlook for both countries.
Interest in the US, China funds are jumping
But in a global context, US and Chinese equity funds are the two regions that have received the most inflow from international investors in the past two quarters, Brandt said.
“Both fund groups have seen a significant rise in interest since mid-last year,” he said. “Chinese funds got the first jump, but the US came back roaring.”
According to EPFR data, net cumulative flows into US equity funds have been negative from early 2020 to November. Flows turned positive in the weeks following the US presidential election, hitting $ 170 billion in the week ending April 7.
In contrast, for much of last year, Chinese equity funds saw net positive cumulative flows surpassing US levels – through December. According to EPFR, net cumulative flows into Chinese equity funds for the week ending April 7 were only $ 29.78 billion.
The data company is a subsidiary of Informa Financial Intelligence and claims to track more than 100,100 investment funds worldwide with total assets of more than $ 34 trillion.
It is not over yet for the influx into China
While US stocks have climbed to new records this year, Shanghai’s composition has changed little since December. Millions of new investors piled into the mainland stock market last year amid a surge in local stocks, raising concerns about excessive speculation.
In recent weeks, the Chinese authorities have repeatedly warned about risks in the financial markets.
Analysts have said that Beijing’s 6% GDP growth target for the year and other economic indicators indicate that instead of focusing on rapid growth, policymakers intend to tackle long-term issues such as heavy reliance on debt.
“We have seen money flows to Chinese funds have been declining recently,” Brandt said. “It seems that there is a certain amount of skepticism, although overall growth rates seem quite impressive compared to elsewhere, China is still seen as vulnerable (if) monetary conditions tighten before the end of the year.”
Still, he expects funds to continue to buy Chinese assets, given the strong demand from private investors since mid-last year.
History indicates that it would take an extreme event to diminish those shopping stakes. Brandt said the last time there was such a surge in retail purchases, it didn’t end until the mainland Chinese stock market crashed in 2015.
The Chinese government also wants to boost investor participation in the local stock market by making it easier for companies to go public and by encouraging foreign institutions to invest.
– Yen No Lee from CNBC contributed to this report.