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(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Sangjin] Despite the Chinese government's recent efforts to boost the economy with various stimulus measures, global investors are increasingly excluding China from their emerging market investments. Concerns about capital flight from Chinese citizens continue to grow.
According to the Financial Times on the 22nd (local time), JPMorgan reported that approximately $10 billion (about 13.8 trillion KRW) has flowed into so-called "China-excluded" equity funds this year, surpassing the total inflow into equity funds investing across emerging markets.
Data from investment analysis firm Morningstar indicates that the number of these funds has nearly doubled over the past two years, reaching around 70. On the same day, Franklin Templeton, an asset management company, announced the launch of a related product.
Assets in these funds have increased by over 75% this year, surpassing $26 billion (about 35.9 trillion KRW).
Investor sentiment has shifted due to factors such as China’s support for Russia in the Ukraine war and escalating U.S.-China tensions, leading many to view investing in China as too risky compared to other emerging markets like India.
The movement to exclude China from investment considerations is primarily observed in the U.S., where major pension funds are reducing their exposure to China citing national security concerns.
Although China's stock market rallied following the government's stimulus measures, these concerns remain unchanged.
The proportion of China in the Morgan Stanley Capital International (MSCI) Emerging Markets Index has dropped from over 40% during the COVID-19 pandemic to around 25%, which some still consider too high.
In addition to the aversion of foreign capital to Chinese investments, the outflow of Chinese assets is also a pressing issue. The Wall Street Journal estimated that approximately $254 billion (about 351.2 trillion KRW) had illegally exited China over the past year as of June.
This figure surpasses the amount of assets that left during the 2015-2016 real estate market slump. According to balance of payments data, the estimated outflow from June 2016 was about $228 billion (around 315.2 trillion KRW).
During the pandemic, from September 2022, the estimated outflow exceeded $370 billion (about 511.6 trillion KRW), but it has since decreased to still over $20 billion.
There are indications that funds fleeing China are finding their way into other emerging markets like India. However, there are also cautious perspectives surrounding the Indian market.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
