International active funds have sold Chinese stocks around the global markets by a net $30 billion over the past year amid the economic downturn from zero-COVID, weakening global demand, and the real estate crisis.
The South China Morning Post cited a Goldman Sachs report, saying that investors might cut further $100 billion to $200 billion in negative scenarios.
Goldman Sachs estimated that overseas investors outside China owned over $1 trillion worth of Chinese stocks in China, Hong Kong, and New York exchanges.
The report also noted that hedge fund allocations to Chinese equities have dropped from a record high of 15% in 2020 to 8%.
Last week, Hong Hong’s Hang Seng Index lost 8.3% falling below 15,000 for the first time in 13 years.
Goldman Sachs last month lowered its previous forecast for China’s economic growth next year from 5.3% to 4.5%. The prediction of 3% expansion this year is unchanged.
The investment bank gives several negative scenarios for Chinese stocks if Beijing persists with its strict zero-COVID policy and other significant factors.
If Hedge fund managers reduced their allocations to 4%, Chinese equities would be withdrawn by $85 billion. If the allocations were lowered to 2%, the figure would be 120 billion.
Earlier this month, the South China Morning Post cited a survey from Montreal-based research firm BCA Research, reporting that most overseas investors found Chinese stocks unattractive. Global investors shared a downside outlook in Chinese stocks, which might fall behind their global peers for the next 12 to 18 months.
