According to Goldman Sachs analysts, global mutual funds slightly reduced their investments in Chinese markets in June due to increasing concerns about the country's economic recovery. EPFR data revealed that these funds had a 5.5% stake in Chinese equities, with active funds maintaining a cautious position on China. Recent declines in the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes, which have reached five-month lows, reflect this trend.
Heavy selling in Asian emerging markets and declining global risk appetite contributed to this shift. China experienced significant outflows, second only to Taiwan, which faced a technology stock rout. Negative sentiment towards China intensified after disappointing economic data, including slower-than-expected growth in the second quarter. Additionally, speculation about the 2024 U.S. Presidential election has further strained sentiment, as uncertainty looms over potential changes in U.S. policy towards Beijing.
The Chinese government has provided limited information on economic stimulus plans following the Third Plenary Session of the Chinese Communist Party. However, there are signs of government intervention to bolster local stock markets, with state-backed asset managers possibly driving domestic ETF and stock purchases. Meanwhile, Asian funds outside Japan showed more interest in Singapore, Hong Kong, and Indonesia, while remaining cautious about China, Taiwan, and Malaysia.
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