Investors are reducing their exposure to Chinese assets and awaiting more clarity on upcoming policies, analysts said.
They say data for the first seven months of 2022 shows hedge funds investing in Greater China are posting their largest net outflows of funds in at least 15 years.
For the January-July period, hedge funds focused on Greater China saw outflows of $5.6 billion and inflows of $2.01 billion, according to Eurekahedge data from With Intelligence.
The year-to-date net outflow of $3.6 billion is greater than any year-to-date outflow since the Hedge Fund Database began compiling such data in 2008. It also marks a reversal compared to net inflows of $1.8 billion in 2021 and $8.7 billion in 2020, when investors piled into a bull run in Chinese markets.
Market watchers and analysts say global investors still want exposure to China, the world’s second-largest economy, and its fast-growing companies, which is why redemptions have been subdued this year even after unexpected events like than the Russian-Ukrainian war. , the sale of Chinese stocks listed in the United States and the long pandemic lockdowns in major Chinese cities.
Still, new allocations have stalled and investors may take longer to do their due diligence on managers, they say, as political uncertainty surrounds the Chinese Communist Party Congress, a gathering held once every five years and which begins on October 16.
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“Inflows in 2022 are significantly lower than in recent years,” said Tay Li Yuan, hedge fund analyst at with intelligencesaid.
“Investors remain cautious given the risk of continued shutdowns as local governments attempt to quell virus outbreaks ahead of the 20th Communist Party Congress.”
Across all strategies, managers pursuing fixed income and long short equity strategies saw the largest outflows in a challenging macro environment, while arbitrage funds continued to attract inflows in 2022.
In a survey conducted by BofA Securities in September, 53% of nearly 120 Hong Kong-based investors surveyed said they planned to “do nothing” by the mid-October congress. Only 42% said they planned to add China to the positioning.
“The sentiment is mixed, and most large institutional investors are still taking a wait-and-see approach at the moment,” said Zhiwei Zhang, chairman and chief economist at Hong Kong-based Pinpoint Asset Management, while noting that stock valuations Chinese stocks are nonetheless attractive to long-term investors.
Jason Pidcock, investment manager at Jupiter Asset Management, said in July that the fund had reduced its exposure to China to zero for its £1 billion ($1.15 billion) Jupiter Asian Income Fund.
The California State Teachers’ Retirement System (CalSTRS), however, issued a request for proposals in August to seek a China-focused equity manager for the first time.
- Reuters with additional editing by Jim Pollard