By Summer Jane and Rae Vee
HONG KONG/SINGAPORE (Reuters) – Investors’ negativity toward China is showing signs of change as money managers are pausing or cutting back on investments, even if they see no sustainable bullish bias or sentiment in the market. Looks like a penny.
Net sales have slowed to more than 20 billion yuan so far this month, after August, when foreigners invested a record 90 billion yuan ($12.34 billion) in Chinese stocks.
For the first time in many months, economic data has also turned in a positive surprise.
Investors at the six big asset managers – Pictet, BNP Paribas Asset Management, Janus Henderson, JPMorgan Asset Management, Invesco and RBC – told Reuters they neither reduced their China weightings following recent measures to support the economy. Neither has it been increased.
“While the overall picture is grim, the bearishness around Chinese equities has reached a local peak and so we are reluctant to cut our exposure,” said Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management.
China’s blue-chip CSI 300 index is down 4.5% this year and hit a 10-month low this week, but is holding steady at support around 3,700.
The Shanghai Composite Index is flat in September after a 5.2% decline in August, while the Hang Seng Index also remains at a new 2023 low. It is down 9.5% this year. World stocks are up 12%.
On the economic front, industrial production and retail sales growth in August also came in better than forecasts.
“Market sentiment towards Chinese equities has improved slightly after the July Politburo meeting,” said Chi Lo, senior market strategist for Asia-Pacific at BNP Paribas Asset Management, as officials promised support for consumption and property. did.
“The supportive policy tone has been seen as slightly positive. Officials recognize the problems in the economy and are willing to increase further support, but still not at the expense of worsening China’s structural imbalances.”
wait and see
The encouraging signs haven’t prompted managers to buy, or attracted global capital, but they are being noticed and many are taking a patiently wait-and-see approach rather than deciding to withdraw more funds. Are.
“The problem at the moment is that portfolio managers’ sentiments are in this painful transition phase – they have faced several perfect storms on the Chinese equity recovery, which are ultimately disappointing,” said Alex Redman, chief equity strategist at CLSA.
“You get to the point where it’s like being beaten twice and being very shy.”
The country’s troubled property sector, of course, remains a major crisis, with major developers like Country Garden and Sino-Ocean close to default.
And while deflationary pressures eased in China last month, record-high youth unemployment rates, uncertainty over household income expectations and deepening US-China tensions clouded the economy’s growth outlook.
“It is very difficult for our clients to trade in the short-term and time horizons in the market,” said Jasmine Duan, investment strategist at RBC Investment Services (Asia).
“The market is likely to see long-term upside only when the economy stabilizes, corporate earnings improve, and foreign investor sentiment toward China assets improves meaningfully.”
looking for options
Others, meanwhile, have sought opportunities in markets outside China, but this trend shows no signs of slowing down. For example, money inflation in India slowed in August.
Sat Duhra, a portfolio manager at Janus Henderson, said his fund has “record-high” positions given the comparatively “stable” macroeconomics and political backdrop in Indonesia and India, among other things.
“China remains investable, but the recent measures fell well short of investors’ expectations, in my view they don’t change anything,” he said, referring to stimulus measures taken by Beijing to shore up its economy.
Patrick Garvin, product director for Asian and emerging markets equities at Invesco, also stands by his China position, but is starting to think about catalysts for gains.
“Although we have selectively added to existing holdings on weakness, we feel we are significantly biased towards China and there is no need to increase exposure given the opportunities available elsewhere,” he said.
“With the sentiment towards China currently so weak, equity valuations may be quite sensitive to signs that corporate fundamentals are starting to improve.”
($1 = 7.2910 Chinese yuan renminbi)
(Reporting by Summer Jane in Hong Kong and Rae Wee in Singapore; Editing by Tom Westbrook and Sri Navaratnam)