China investors rush abroad
The rush to invest offshore reflects low confidence at home.
Chinese money is pouring into funds invested in offshore assets at breakneck speed, butting up against outbound investment limits and complicating Beijing’s efforts to revive domestic markets and stabilise the yuan.
The rush to invest offshore reflects low confidence at home and is evident in sales of funds issued under the Qualified Domestic Institutional Investor (QDII) programme, a key outbound investment channel that allows
Chinese to buy overseas securities under Beijing’s strict capital controls.
QDII fund units sold in January jumped 50% yearonyear to a record high while those of domestic equity mutual funds dropped 35%, data from the Asset Management Association of China shows. Assets under management for QDII funds were up 19% yearonyear.
Exchangetraded funds (ETFs) tracking Nikkei 225 and Nasdaqlisted stocks flagged price premium risks in recent weeks as buyers bid well above the value of the underlying assets to grab a share. The outbound scramble illustrates the pressure on China’s capital account and currency and the challenges in rebuilding domestic investors confidence in their home market.
Chinese stocks are wallowing near a fiveyear nadir while yields on the country’s 30year treasury bonds have plumbed record lows.
“We feel a pressing need from our wealthy clients to diversify asset allocation,” said Le Rong, founding partner of Shanghaibased FR Harvest Asset Management. After 20 years of high growth and high returns, the Chinese economy faces a slowdown in the foreseeable future,” he said.