"Escape When China Rebounds"... Seohak Gaemi Taking a 'Bonjeol' Stance

Foreign Retail Investors Scoop Up $300 Million in U.S. Stocks This Month
Chinese Stocks See $8 Million Net Selling
Investors Exhausted by This Year's Downturn Sell at Break-even

[Asia Economy Reporter Ji Yeon-jin] As the Chinese stock market, which had been declining due to the re-lockdown caused by COVID-19, showed signs of rebound this month, domestic investors have been selling off Chinese stocks. Experts forecast a strong market in China in the second half of the year due to the easing of lockdowns and economic stimulus measures, but it is interpreted that foreign investors who endured the weak Chinese market since the beginning of the year started selling as stock prices rose slightly, allowing them to avoid losses.

According to the Korea Securities Depository on the 13th, domestic investors bought US stocks worth $4.193 billion (about 5.3628 trillion KRW) and sold $3.808 billion (about 4.8704 trillion KRW) up to the 10th of this month, recording a net purchase of $385 million (492.4 billion KRW). On the other hand, for Chinese stocks, they sold $72 million (about 92.4 billion KRW) and bought $64 million (about 82.3 billion KRW), showing a net selling preference of $8 million (about 10.2 billion KRW).

Among overseas stock markets where domestic investors went shopping, China and Japan (210,000 dollars, about 200 million KRW) were the only markets showing a net selling preference. The Euro market, Hong Kong, and other markets recorded net purchases of $12 million (about 1.54 billion KRW), $11 million (about 1.41 billion KRW), and $1 million (about 120 million KRW), respectively.

At the beginning of this month, global stock markets mostly showed weakness except for the Chinese market. The Shanghai Composite Index and the Hang Seng Index rose by 3.4% and 2.8%, respectively. The US market fell more than 5% in both the Nasdaq and the Standard & Poor's (S&P) 500 index due to the inflation shock.

The Shanghai Composite Index recorded a weak market from the beginning of the year as risk-averse sentiment spread due to global tightening and the Ukraine war, and showed a sharp decline after March. Chinese health authorities implemented a 'Zero COVID' policy from the early stages of the pandemic, but with the resurgence of COVID-19 in China this year, major cities including Shanghai were locked down. The suspension of economic activities pressured the Chinese stock market amid forecasts that corporate earnings and growth rates would decline.

However, lockdowns in major Chinese cities were lifted this month, and the stock market is rising again due to expectations of economic stimulus from the Chinese government. The Shanghai Composite Index surpassed the 3,700 level in September last year but fell to an intraday low of 2,863.65 on April 27. Since then, it has recovered, closing at 3,284.83 on the 10th of this month, up 14.71%.

Soyeon Park, a researcher at Shin Young Securities, said, "China recently lifted lockdowns and is reopening its economy. Since the OECD leading economic index peaked in January 2021, 5 to 6 months earlier than other countries, the recovery is likely to be faster," adding, "Ahead of the October Party Congress, interest rate cuts have been implemented, turning monetary policy toward stimulus." Ji-yeon Hwang, a researcher at Kyobo Securities, said, "The US inflation outlook has already deviated from market expectations, and with the peak-out expectations broken, one or two positive economic indicators are insufficient to significantly impact the market," adding, "It is necessary to pay attention to the Chinese market, which maintains stable inflation levels amid expectations for economic stimulus and the lifting of COVID lockdowns."

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