Overseas investors are staying away from Chinese stocks, while mainland investors keep buying with the hope that Beijing’s strict COVID curbs will be loosened.
According to Nikkie Asia, global investors dumped $9.45 billion worth of Chinese stocks in September and October. The stock sell-off keeps pace in November.
Hong Kong’s Hang Seng Index is down about 30% for the year, while SSE Composite Index declined 16% over the same period, despite a sharp rally last week.
Mainland investors are betting on stocks amid rumors that Beijing will soon relax its controversial COVID-control policies, which rely on widespread lockdowns and mass testing to contain new outbreaks.
However, Chinese health officials last week gave no signal about easing COVID restrictions after several days of speculation. The speculation followed a week in which China’s stock markets rallied, hoping that restrictions would ease.
Nikkie Asia reported that Chinese investors had bought $46 billion worth of Hong Kong-listed stocks via the trading link, even as the Hang Seng Tech Index plunged about 40% this year.
As Xi Jinping remains in power after the mid-October national congress, investors have another reason to worry.
Experts said Xi Jinping’s “common prosperity” drive is critical for wealthy Chinese shifting their wealth out of the country. Common prosperity is an approach that aims to curb “excessive” income to reduce wealth inequality in China.
According to South China Morning Post, funds sold Chinese stocks around the global markets for $30 billion last year. The new outlet cited a Goldman Sachs report, saying investors might cut a further $100 billion to $200 billion in unfavorable scenarios.