China sees investment flow reversal after stimulus surge, says Cameron Brandt

Although China experienced heightened investor interest in the first week of October due to discussions on economic stimulus, that trend has now reversed, and the markets are underperforming.

Cameron Brandt, Director of Research at EPFR Global, said that recent investments in China have decreased. He believes this is because China’s markets have not been performing well. Speaking with CNBC-TV18, Brandt explained that investor interest surged when discussions about economic stimulus began in China. In fact, in the first week of October, a record $40 billion flowed into Chinese markets. However, since then, the trend has reversed.

Brandt believes this reversal is due to many investors who had been waiting for some gains to sell their positions. “Given the long spell of underperformance by Chinese markets, there were a lot of people waiting for some gains to sell into, and they have not been slow to do that,” he said.

Despite this, the two weeks of outflows from Chinese markets amount to only about a quarter of what flowed in during that one record-setting week. This suggests that there is still a significant amount of liquidity in Chinese equity markets compared to a month ago. However, domestic Chinese investors appear to be demanding more results before reinvesting heavily. Brandt stated “What have you done for me lately?” seems to be the mindset among Chinese investors, reflecting their cautious approach.

From the perspective of mutual funds and Exchange Traded Funds (ETFs), Brandt said that the rotation of funds from China to other regions has not been particularly strong, especially in Europe. In fact, over the past two weeks, approximately $10 billion has flowed out of China-focused equity funds. Meanwhile, investments in India have been neutral, showing far less enthusiasm than earlier trends.

As the US Presidential election approaches, global investors are shifting their focus towards more secure investments. This past week, there has been increased interest in derivative funds, cryptocurrency funds, precious metals like gold and silver, and funds focused on developed markets, which are often considered safe havens. However, the US remains off the table until the election process concludes, leaving investors uncertain about its short-term outlook.