"No Prolonged Adjustment" Chinese Funds Attracting Money

400 Billion KRW Capital Inflow in One Month
Chinese Government Promotes New Growth Industries
Investment Sentiment Expected to Recover Centered on Growth Stocks

[Asia Economy Reporter Minji Lee] Although investment sentiment toward risk assets has weakened due to the sharp rise in the US 10-year Treasury yield, funds flowing into China-focused funds are increasing.

According to financial information provider FnGuide on the 23rd, among overseas equity funds, China attracted the most funds through the 22nd of this year. A total of 931.8 billion KRW has flowed into 187 China equity funds set up domestically since the beginning of the year. This far surpassed domestic equity funds (-12.4 billion KRW), as well as Asian countries such as Japan (-14.2 billion KRW), India (-76.5 billion KRW), and Vietnam (-254.1 billion KRW), and was also higher than the North America region (133.6 billion KRW) and Emerging Europe region (4.3 billion KRW).

In the past month, about 400 billion KRW has flowed into China funds. Despite the Shanghai Composite Index dropping about 4% this month (3,357.74 as of the 10th) due to growth stock adjustments triggered by the US 10-year Treasury yield spike and concerns over liquidity tightening, investor sentiment has not been dampened. During this period, North America region funds and domestic equity funds only saw inflows of 59.3 billion KRW and 250.9 billion KRW respectively, while all other overseas region funds experienced net outflows.

As the Chinese stock market underwent a significant correction centered on growth stocks, the fund returns since the beginning of the year recorded 2.46%, falling short of the average return of overseas equity funds (4.12%). This was also lower than Japan (9.67%), India (14%), Vietnam (10%), North America (3%), and Emerging Europe (6%).

Despite this situation, the influx of money into China funds appears to be driven by the judgment that the Chinese stock market correction will not be prolonged. Experts also expect that considering the debt soundness and the slowing economic momentum, the Chinese government will not rapidly implement liquidity withdrawal measures. Additionally, since the government is fostering new growth industries such as healthcare and gene bio technology through the 14th Five-Year Plan, there is an opinion that investment sentiment could expand centered on related growth stocks.

There is also growing support for the forecast that excessive discount rates on Chinese companies will decrease due to the rapid growth of the Chinese public fund market. Last year, the Chinese public fund market surged to 20 trillion yuan, and in January alone, 700 billion yuan flowed in.

The fact that solid returns are being recorded due to rapid economic recovery is also positive. After more than a year since the outbreak of COVID-19, some funds have nearly doubled in returns. Over the past year, the ‘Mirae Asset China Industry Representative Pension Securities Convertible Type Investment Trust’ achieved a return of about 98%. This pension savings fund mainly invests in industry representative stocks in China (94%) and Hong Kong (6%), with a 5-year return of approximately 187%.

This content was produced with the assistance of AI translation services.