China funds suffer strong outflows
Investors pulled $1bn from China-focused funds in the first two months of the year as fears about the country’s slowing economy continued to affect investor appetite.
The withdrawals from Chinese equity funds in the US and Europe follow net redemptions of $5.4bn, $1.8bn and $5.1bn respectively in the three preceding years, according to figures from Morningstar, the data provider.
Haiyan Li-Labbé, China analyst at French fund house Carmignac, said that concerns about China are unlikely to ease given the slowdown in Chinese property sales.
She added: “The [government’s] anti-corruption drive is impacting not only consumption but also fixed asset investment. I don’t expect a strong pick-up of investor appetite for China funds this year.”
Diana Mackay, chief executive of asset management research group MackayWilliams, said a lot of money poured in to China funds after the financial crisis when “investors were desperately searching for markets that were uncorrelated”.
“When concerns started to build about the sustainability of [Chinese] GDP growth, there was a lot of investment to come out,” she said.
Fresh concerns have been raised about the Chinese economy this year after the country experienced its first corporate bond default in March, on top of weaker than expected industrial production and exports.
Mark Konyn, chief executive of Hong Kong-based Cathay Conning Asset Management, said: “Investor sentiment [towards China] is at rock bottom despite efforts by the mainland government to provide greater access to the onshore market.”
“Recently announced stimulus measures on their own are unlikely to prove the catalyst for international flows to return.”