China might see its first yearly outflow from equities this year — but if and when it happens, investors would not know from exchange data.
That is because the country’s stock exchanges would stop releasing daily data on overseas fund flows starting today, depriving investors of a key sentiment indicator to track the US$8.3 trillion market.
The change, first hinted at in April, comes as foreign funds have steadily withdrawn from the market, taking the year-to-date tally to negative as of Friday.
Photo: Raul Ariano, Bloomberg
Analysts saw the move as another effort by authorities to prop up the market, hoping to reduce volatility induced by high-frequency data and turn investor focus to longer-term indicators.
“Beijing stopped the release, because the data hasn’t been looking good, and it’s volatile,” abrdn Asia Ltd investment director Ng Xin-yao (黃新耀) said.
“They probably don’t want the data to amplify capital outflows,” but “it doesn’t solve the root of the problem,” he added.
If the selling persists, China might see the first annual outflow from its stock market since 2016, when Bloomberg began tracking purchases through the trading links with Hong Kong.
With the absence of data, investors would have to rely on the Chinese central bank’s quarterly reports on financial assets held by overseas entities for an indication.
Those are subject to a lag and measure the value of outstanding equities held by foreigners through broader channels, rather than flows.
China’s benchmark CSI 300 Index has fallen more than 9 percent since a May peak, as a hoped-for earnings recovery failed to materialize and policy support fell short.
Stocks have flopped even with massive purchases by state funds, with estimates that they plowed the equivalent of US$66 billion into exchange-traded funds this year.
There is little sign that an economic recovery is afoot. The latest data showed a surprise slowdown in fixed-asset investment and a softening in industrial production.
Global funds might find more reasons to shun China in the run-up to the US presidential elections, as anti-Beijing rhetoric and unfavorable trade measures are expected to gather pace.
“Market sentiment stagnates as more disappointing macro prints are released and policy easing remains reactive,” Morgan Stanley analysts including Laura Wang (王瀅) wrote in a note on Thursday. “We expect market volatility to remain relatively high and advise positioning more defensively in the near term.”
The latest decision followed an end to disclosing data on intraday flows through the trading links in May.
Last year, China asked fund houses to stop displaying real-time estimates of mutual fund products’ net value.
The lack of data transparency has been a constant issue in China, where the publication of some statistics has ceased without explanation — particularly in cases where the information has not been favorable for the economy or markets.
After the new rule takes effect, the only daily data published by the exchanges would be the total turnover and the number of trades made in stocks and exchange-traded funds via the Hong Kong links, as well as the turnover of the 10 most active securities. The total number of shares held through the links would be disclosed on a quarterly basis.
Real-time trading data for flows from China to Hong Kong, referred to as the southbound data, would still be available after this month’s deadline.
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