Smart Money Flees China’s Stock Market After Quick Profits
What’s new: More than 17 billion yuan ($2.48 billion) of foreign capital in China’s cross-boundary investment programs fled the mainland market Tuesday when A-shares plunged following a recent bull run.
Capital pouring into the A-share markets via Hong Kong — so-called northbound funds — posted the highest daily net outflow since the launch of the Shanghai and Shenzhen-Hong Kong stock connect programs in 2014, according to exchange data.
The Shanghai Composite index closed down 0.83% Tuesday at 3,414.62. It has gained 14.4% this month.
Foreign investors dumped stocks such as liquor makers Guizhou Moutai and Wuliangye Yibin Co., state-owned duty-free goods distributor China Duty Free Group, semiconductor manufacturers Wingtech Technology and GigaDevice Semiconductor, and electric vehicle battery manufacturer Contemporary Amperex Technology Co., exchange data shows.
The background: Northbound funds, mainly consisting of foreign capital and money from offshore Chinese businesses, are often called smart money because they are mainly controlled by institutional investors that are usually acutely familiar with China’s investing environment.
Since the start of July, the flow of northbound funds accelerated. In just three days from July 2–6, northbound funds had net inflows of 45 billion yuan, exceeding that of the whole month of May. But the inflow turned into an outflow July 10 when debate over whether the bull would continue started to boil.
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