Markets Experienced Second Largest Inflows to China Funds, According to Citi

Equity funds saw inflows of $4.7 billion for the week ending October 2, 2024, while bond funds attracted $15.7 billion, as per a report from Citi.

Investments in China funds surged, drawing in $13.9 billion in inflows, as the market rebounded by over 20% since late September following the government’s announcement of various stimulus measures aimed at revitalizing the slowing economy. Citi strategists pointed out that this marks the second-largest inflow recorded, just behind the $20.6 billion influx seen in February this year.

The Hang Seng China Enterprise Index has increased by 35% since reaching a low last month, with much of this rally attributed to the comprehensive stimulus package revealed by Beijing on September 24. Some individual stocks have experienced extraordinary gains, with their prices more than doubling within days.

Looking to the future, the trajectory of Chinese equities is largely dependent on whether the Chinese government will implement further strategies to stimulate the economy. Investors are also closely monitoring consumer spending trends during one of the nation’s major holiday periods. Mainland markets are expected to reopen following the Golden Week holidays on Tuesday.

Meanwhile, U.S. funds faced net redemptions of $9.7 billion as the inflow of exchange-traded funds (ETFs) slowed, and European funds experienced significant outflows totaling $6.1 billion, the most substantial single-week outflow from European markets since 2022. Both EU funds (excluding the UK) and UK funds contributed to these outflows, while global and Japanese funds each attracted over $2 billion in inflows.

In Asia, India and the Philippines were the only markets that saw foreign inflows last week, while Korea and Taiwan recorded slight outflows. In Japan, the TOPIX index has encountered six consecutive weeks of foreign selling, resulting in the erosion of most year-to-date inflows.