China Crisis: Investors Flee China, Dump $1.4 Billion Worth Of Stocks


Last Monday, foreign investors dumped $1.4Billion (9.7 billion Yuan) worth of yuan-denominated shares through Hong Kong exchange links.

Ping An Insurance (Group) Co, Kweichow Moutai Co and Hangzhou Hikvision Digital Technology Co – favored stocks that skyrocketed to at least 97 per cent last year – were the most sold by overseas traders on Monday.

Beijing’s recent move to bolster the economy did not allay the growing anxieties that the trade war with US brings.

“There’s an acute shortage of confidence in the market. Few investors are buying,” said Alvin Ngan, a Hong Kong-based analyst at brokerage Zhongtai International.

“China’s economy is under heavy downward pressure… and you need time to observe if recent easing measures are effective or not,” he added.

Last Sunday, the People’s Bank of China (PBOC) announced a 100-basis-point cut to banks’ reserve requirement ratio (RRR) with the intent to cushion the blows of the trade war.

However, investors remained pessimistic which caused shares to crash.

“Foreign investors turned bearish, unlike their previous optimistic buying of Chinese A shares,” said Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd. “The massive northbound selling is a sign of growing concern over the relationship between the U.S. and China.”

David Dai, general manager of Shanghai Wisdom Investment Co Ltd, a hedge fund said, “An RRR cut is not enough to counter the impact of the trade war. The economy is quite weak, and I see a growing number of companies putting their assets up for sale due to pessimism. And today’s fall is not surprising after weak performance in external markets during the holiday.”

Brokerages are ready to throw in the towel on China’s equities.  JPMorgan Chase & Co.’s cautious turn last week followed similar moves by Morgan Stanley, Nomura Holdings and Jefferies Group earlier in the year. Contrarians include HSBC Holdings, whose analysts still adhere to their overweight rating on China said that “it’s been a painful call.”

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