Global Fund Mangers Offload $3 Billion Worth of Chinese Equities

As per Morgan Stanley, global fund managers significantly offloaded China equities in October despite additional efforts by authorities to stimulate the world's second-largest economy. The data utilized in the report was provided by the fund flow tracker EPFR.

According to a report viewed by Reuters, the combined net outflow from active long-only funds in China and Hong Kong equities reached $3.1 billion last month. This marked the third consecutive month in which net selling surpassed $3 billion.  The primary reason for the outflows is mainly the result of regional funds rebalancing out of China, with European-domiciled funds taking the lead.

Foreign long-only managers are currently at their lowest weighting in China since 2018 due to continuous outflows, as stated by Morgan Stanley. According to the report, European funds have sold approximately 50% of their accumulated holdings since late 2020. Additionally, there has been a notable increase in outflows from funds based in the United States during October.

Investors remain cautious on China's economic recovery, particularly after manufacturing activity unexpectedly contracted in October.

The MSCI China benchmark slumped 4.3 percent last month, while the CSI 300 dropped 3.2 percent. Stocks sold off include JD.com, Xiaomi and China Construction Bank. But bets were added to internet giants such as Alibaba and Baidu, as well as to insurance firm AIA.

Separately, Goldman Sachs prime services data showed hedge fund net allocation to China increased to 8.5 percent as of end-October, up from 8.1 percent at end-September.