According to Bloomberg, net outflow from offshore investors in Chinese stock markets reached a record 2.2 billion dollars for the first five months.
Foreign investors sold shares in Shanghai and Shenzhen stock exchanges via trade link.
Last year, China had about 32 billion dollars in net inflow, an average of 2.7 billion dollars net inflow monthly.
The drop is primarily due to China’s strict Covid lockdown, the Russia-Ukraine war, and the risks of unexpected regulatory crackdowns from Beijing.
Meanwhile, China has signaled it’s lifting strict lockdowns, and Shanghai is scheduled to fully open as Beijing eases restrictions in some parts of the capital.
Most of the Covid restrictions in Shanghai’s financial hub have just ended. The city now offers incentives to boost its battered economy after a two-month lockdown that hit most of its sectors.
As Bloomberg reported, offshore investors will wait for clear signals of an economic recovery via macro financial and earnings data before jumping back into the market. However, factors such as a monetary tightening policy from the Federal Reserves, China’s ineffective Covid measures against the omicron variant, and its related stimulus policies will be considered by investors.
China also faces substantial drops in venture capital and private equity investment, not just in stock markets. Values of those deals dropped sharply to 44% in the first four months of the year, to only 24.7 billion dollars, compared to 43.7 billion dollars last year.
In addition, European and American investment firms also shared their pessimistic outlook about China’s market as many consider shifting their investment out of China.
In a May survey, nearly a quarter of European firms said they wanted to move out of China, a ten-year high.
In early April, another poll from the American Chamber showed that nearly 50% of respondents said they would reduce their investment if Covid restrictions remained in place.