China Equity Funds See Biggest Weekly Inflow in Years

Investors poured close to $12 billion into Chinese equity funds in the week to Wednesday, a Bank of America Global Research report showed on Friday.

That was the largest inflow since 2015 and the second largest ever – a positive sign for battered Chinese stocks, which have endured a severe decline over the past three years.

Hong Kong’s Hang Seng Index is up nearly 4% this week, one of its best rebounds over the past six months, and onshore blue chips have risen nearly 3% as Beijing steps up efforts to restore confidence in the world’s second economy.

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China’s central bank said earlier this week it would cut the amount of cash that banks must hold as reserves.

Beijing has also announced steps to ease a liquidity crunch for troubled property developers, while media have reported a 2-trillion-yuan ($278.53 billion) rescue package to buy stocks.

Those come as onshore Chinese blue chips trade around their lowest in around five years and the Hong Kong benchmark at its lowest in over a year due to investor fears about the Chinese economy, particularly its beleaguered property sector.

That collapse in shares merits a wager on an eventual rebound and perhaps a new approach to investing in the market, some investors say.

A sharp fall in Chinese property stocks made China “the world’s most enticing contrarian long ‘trade'”, BofA analysts said, noting: “No one believes it’s an ‘investment'”.

Elsewhere, equity funds recorded investments of $17.6 billion, and bond flows of $14.2 billion in the week to Wednesday, BofA said, citing data from fund flows and asset allocation data provider EPFR.

US stocks, meanwhile, were surging to new highs driven by tech shares as an AI “baby bubble” grows, the BofA note said.

According to its note, tech stocks saw a third straight weekly inflow of $2.8 billion, the largest since last August.

Tech and technology-related sectors drove the S&P 500’s 24% gain in 2023, and many of those stocks are off to a strong start again this year.

Emerging market (EM) equities registered a record weekly inflow of $12.1 billion, and EM debt markets a third week of outflows, BofA added.

It said that bond markets have recorded inflows for the past five weeks, with inflows worth almost $5 billion in the past two weeks into government bonds.