In a $11 billion selloff, global funds abandon China’s blue chips

Global investors have been selling China’s blue-chip stocks for the longest period on record, indicating that even the country’s sector leaders are losing popularity as the meltdown worsens.

Foreign investors sold 6.2 billion yuan ($851 million) in Kweichow Moutai Co. between August 7 and August 18, making China’s largest liquor maker the most heavily traded stock through trading linkages with Hong Kong. According to the most recent statistics on individual stocks accessible on Bloomberg, it was followed by 4.7 billion yuan in sales for prominent renewables company LONGi Green Energy Technology Co. and large lender China Merchants Bank Co.

Overseas money has been departing the mainland market, unloading the equivalent of $10.7 billion in a thirteen-day withdrawal streak that ended Wednesday, the longest since Bloomberg began tracking the data in 2016. Their departure comes as a prolonged housing downturn raises the possibility of broader financial contagion, with the nation’s share index among the worst performers globally this month, losing about 8%.

The CSI 300 Index is presently trading at its lowest level since November, as optimism following the July Politburo meeting soon faded. Foreigners had flooded into the market at the time, only to exit in droves when economic data continued to disappoint and stimulus failed to please.

The ten most-sold stocks by foreigners in the most recent fall were among the top 50 on the CSI 300. Through August 18, major distiller Wuliangye Yibin Co., China’s Ping An Insurance Group Co., and EV producer BYD Co. each sold at least 2.9 billion yuan.

Bloomberg Intelligence research also found that emerging market funds had been more pessimistic on Chinese stocks, increasing their average underweight position to over 100 basis points in the second quarter, up from 24 basis points three months earlier. They were 40 basis points overdue as of the end of 2022.

The selling run shows no signs of cooling. On Wednesday, overseas funds lost another 10.5 billion yuan. A top-performing Chinese macro hedge fund blamed global money for the country’s stock market decline, describing it as a “bunch of aimless flies” that cause market volatility. Foreign investors, however, own fewer than 4% of total A-shares outstanding, according to a study released this month by China International Capital Corp.