(Bloomberg) — Billions of dollars are also flowing out of China’s largest money market exchange-traded funds (ETFs) and billions more are flowing into equity-tracked ETFs, with the Chinese government finally The move is a sign that it is drawing skeptical investors back into the country’s struggling stock market.
Most Read Articles on Bloomberg
Last week, China’s 10 largest money market ETFs saw a combined outflow of $4.1 billion, while the 10 largest stock ETFs saw $6 billion in new capital flows. The change follows fresh stimulus, which was the best week for mainland stocks since 2008.
Outflows were concentrated in the two largest cash funds, Yinhua Trade Money Market Fund, which lost $2.4 billion, and Huabao WP Cash Tianyi, which lost $1.7 billion, accounting for more than 10% of each fund. . Flows into the top 10 equity funds were led by the Huatai Pine Bridge CSI 300 ETF, which attracted $2.9 billion.
In a stunning round of stimulus aimed at supporting the economy and financial markets, China has cut borrowing costs, eased rules on buying second homes and issued cash transfers. Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore, said the move to include fiscal stimulus was a big factor in the market reaction.
“The magnitude of what they’ve done is not enough, but the direction is definitely critical and that’s what matters,” Ferres said in an interview.
Money market funds around the world were raising capital as many developed market economies raised interest rates to combat inflation. In China, where deflation has become a bigger challenge, investors have rushed into such products due in part to a long-term slump in the country’s stock market. Demand for these investments also helps nonbank financial institutions avoid seasonal liquidity shortages.
Brittney Lam, head of long and short equities at Magellan Investments Holdings, said in a note about the rally in Chinese stocks that investors should “buy first, think later.” Recent stimulus measures are similar to policies announced a decade ago, such as local government debt support, and those measures have caused stock prices to soar, he said.
“This seems to be a repeat of the same thing, and I hope we don’t miss out on the rise by focusing on economic indicators that are essentially lagging,” Lam said. “As with all market cycles, multiples move from sentiment first, followed by fundamental changes.”
story continues
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
