US Institutions Sold 134 Trillion Won Worth of Chinese Stocks in One Month

As tensions between the U.S. and China escalate over issues such as semiconductors and Taiwan, the stock value of Chinese companies listed on the U.S. stock market has evaporated by more than $100 billion (approximately 134 trillion KRW) just this month.

According to Bloomberg on the 25th (local time), the Nasdaq Golden Dragon China Index, which tracks the stock prices of major Chinese companies listed on the U.S. stock market, has fallen for six consecutive trading days recently, dropping more than 10% since April 1 of this year.

As a result, the index recorded its lowest level since October last year, with stock value losses exceeding $100 billion this month alone.

[Image source=Yonhap News]

원본보기 아이콘

It is analyzed that investors are selling off their holdings due to the U.S.-China conflict. They seem to judge that the negative impacts from worsening U.S.-China relations?including the Taiwan issue, sanctions on China's video-sharing platform TikTok, and semiconductor supply chain restructuring?will have a greater effect on stock prices than the benefits from China's reopening (resumption of economic activities).

Furthermore, U.S. President Joe Biden is expected to announce additional restrictions on investments by U.S. private companies in China's advanced technology sector as early as the end of this month. Although U.S. Treasury Secretary Janet Yellen has expressed willingness to visit China, signaling a conciliatory gesture toward China, the U.S. is steadily building regulatory justifications citing national security concerns, further worsening investor sentiment.

Institutional investors are reducing their investments in Chinese stocks. Gilbert Wong, a strategist at investment bank Morgan Stanley, pointed out, "Long-only fund managers who only pursue buying strategies have sold off large amounts of Chinese stocks this month," adding, "As a result, the gap between their held assets and the benchmark (Nasdaq Golden Dragon China Index) has widened."

Swiss asset management firm UBP downgraded its investment opinion on Chinese stocks from 'overweight' to 'neutral' this week, citing geopolitical risks. The Ontario Teachers' Pension Plan in Canada also recently announced it will gradually reduce its Asia equity investment team based in Hong Kong.

Chinese companies listed on the Hong Kong stock market are also experiencing sluggish stock prices. According to Bloomberg, the Hang Seng China Enterprises Index, composed of mainland Chinese companies listed on the Hong Kong Stock Exchange, was one of the five worst-performing among 92 Bloomberg-tracked benchmarks over the past three months.

Bloomberg reported, "Although China's consumption rebound is driving a faster-than-expected economic recovery, some investors have abandoned a positive outlook on Chinese stocks," adding, "Investors are reducing their exposure to Chinese stocks amid rising U.S.-China tensions."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.