After attracting foreign capital to China's markets for years, Chinese President Xi Jinping now faces the threat of a decline in financial globalization due to China's recent policies against technology companies.
In a report published by the Australian magazine "The Sydney Morning Herald", writer Sofia Horta-e Costa said that money managers who have been seduced by the huge returns of China and large tech companies say that the reasons for avoiding investment in China outweigh the motivations to buy from it, citing unfair regulatory campaigns. The expected economic damages from strict COVID-19 policies, as well as the heightened risks of the volatile real estate market.
“The giant power of Western capital is starting to move away from China,” said Matt Smith of Ruffer LLP, a $31 billion investment firm that finally closed its Hong Kong office after more than a decade due to shrinking demand. And it's easier to put China aside for the time being when you don't see an end in sight with the zero-Covid policy and the return of geopolitical risks.
The writer mentioned that the foreign presence in China's modern capital markets has increased significantly since Xi became president in 2013, as the government established channels to allow the flow of capital and the goal was to encourage inward investment, finance private projects, and revitalize the economy;
All while maintaining significant control over capital outflows.
But Xi's government showed little interest in global investors last year when it unleashed a series of crackdowns on the country's most profitable companies, spreading mistrust and confusion about the Communist Party's goals, and growing wary of Chinese assets that arose during this year's trade war with the United States. After Russia attacked Ukraine.
This caution is leaving a mark on the market, as allocations to China among emerging market equity funds have fallen to a 3-year low, said a report this month by EPFR Global.
On a recent trip to London, Citigroup's research team found what they described as a "sudden drop in customer engagement" toward China.
Discussions Gaurav Garg and Juna Chua had with investors focused on the direction of China's growth and stimulus policies, analysts wrote in a July 7 report, and said clients were too focused on India and Korea markets instead because they lost faith in China.
People familiar with the matter told Bloomberg this month that Carlyle Group's new $8.5 billion fund will have lower-than-usual investment risks for China with markets such as South Korea and Southeast Asia. Australia and India.
Of course, fully divesting from China is not an easy decision because it is home to a $21 trillion bond market and $16 trillion equities, with no other alternatives to it.
“We are seeing more and more opponents looking to use our money to rebalance China,” said Jason Hsu, chief investment officer at Rayliant. occupational hazards.
The writer pointed out that these risks have a greater impact at a time when it has become difficult to make money in China, as the CSI 300 index (CSI 300) is down by about 27% after it was at its peak 17 months ago, lagging behind the S&P Index. P500" (S&P 500) by 26 percentage points.
The policy divergence with the United States eliminated China's yield advantage over Treasuries for the first time since 2010, depreciating the yuan.
Investors in high-yield Chinese dollar bonds are posting a year-on-year loss of 34%, worse than last year's returns.
The Ruffer team plans to apply its views on China's economy by investing in stocks in Japan, the United States and Europe.
“Even if you have a positive macro view of China, it is very difficult to sell Chinese stocks inside, and it has become difficult to build optimistic structural successes on Chinese assets,” said Jamie Danhauser, chief economist at Rover.