Now, roughly a year out, global investors are reassessing their outlook on both countries. U.S. stocks plunged in March 2020 as worries about the coronavirus pandemic’s impact on economic growth gripped the markets. By that time, China was on its way to controlling the domestic spread of the virus and the economy returned to growth in the second quarter.
Interest in U.S., China funds jump In contrast, Chinese stock funds saw net positive cumulative flows for much of last year that exceeded U.S. levels — until December. Net cumulative flows to Chinese stock funds as of the week ended April 7 were just $29.78 billion, according to EPFR.
Net cumulative flows to U.S. stock funds since the beginning of 2020 were negative until November, according to EPFR data. The flows turned positive in the weeks following the U.S. presidential election, and reached $170 billion in the week ended April 7. The data company is a subsidiary of Informa Financial Intelligence and claims to tracks over 100,100 investment funds worldwide with more than $34 trillion in total assets.
“Both fund groups have seen a significant jump in interest since the middle of last year,” he said. “China funds got the initial jump but U.S. came roaring back.” But in a global context, U.S. and China stock funds are the two regions that have attracted the most inflows from international investors over the past two quarters, Brandt said.
While U.S. stocks have climbed to fresh records this year, the Shanghai composite is little changed since December. Millions of new investors piled into the mainland stock market last year amid a surge in local stocks, stirring concerns of excessive speculation. It’s not over for China inflows
“We have seen flows to China funds tail off recently,” Brandt said. “It seems there’s a certain amount of skepticism even though headline growth numbers seem pretty impressive compared to everywhere else, China is still seen as vulnerable (if) monetary conditions tighten before the end of the year.” Analysts have said Beijing’s 6% GDP growth target for the year and other economic indicators signal that rather than focusing on high-speed growth, policymakers are intent on cracking down on long-term problems such as high reliance on debt. In the last several weeks, Chinese authorities have warned repeatedly of financial market risks.
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