China’s securities regulator is planning to hold a meeting with some of the world’s largest asset managers in an effort to restore confidence following a period of significant outflows by foreign funds. The meeting, which is scheduled to take place in Hong Kong and will be hosted by Fang Xinghai, a vice chairman of the China Securities Regulatory Commission, aims to address concerns about the recent trend of foreign fund withdrawals.
Notable firms like Fidelity International Ltd. and Goldman Sachs Group Inc. are among those that have received invitations to the meeting, according to individuals familiar with the matter. While China has traditionally relied on its domestic investors to stabilise markets during periods of volatility, it is now taking active measures to engage with major global funds.
This meeting follows a recent seminar attended by prominent Chinese institutional investors, during which the regulatory commission urged entities such as the state pension fund, large banks, and insurers to increase their investments in stocks.
Over the past thirteen days leading up to Wednesday, global funds have withdrawn nearly $11 billion from the mainland market, marking the longest consecutive stretch of outflows since Bloomberg began monitoring such data in 2016. This exodus comes as China’s economy grapples with challenges including the lingering effects of Covid restrictions, a downturn in the housing market, and a government crackdown on the private sector.
In addition to the asset manager meeting, regulators have also introduced further easing of mortgage policies to stimulate the residential property market. Despite these efforts, the CSI 300 Index, encompassing shares from Shanghai and Shenzhen, experienced a 0.4% drop on Friday, extending its total decline this month to 7.6%. This places it among the weakest performing indices globally for the year.
Amid these developments, the founder of Shanghai Banxia Investment Management Center, Li Bei, attributed the stock market’s decline to foreign investors. In a social media post, Li Bei expressed the view that overseas investors have contributed to market volatility, suggesting that their impact has been disruptive.
However, it’s worth noting that foreign funds have represented only approximately 6% of the overall onshore turnover this year. Moreover, their ownership of total A-shares outstanding is less than 4%, as reported by China International Capital Corp.
Despite attempts to reach out to the China Securities Regulatory Commission for comment, there has been no response. Both Fidelity and Goldman Sachs have declined to provide statements as well.
In recent months, Beijing officials have proactively aimed to reassure investors regarding the country’s economic strength and its openness to foreign investment. An official statement from the Politburo in July that promised increased support initially led to a market rally, but the optimism subsided due to ongoing disappointing economic data and underwhelming stimulus measures.
To bolster investor confidence, China has implemented a series of measures including encouraging mutual funds to invest in their own products, promoting increased share buybacks by companies, and advising mutual funds against massive stock sell-offs. Despite these efforts, the CSI 300 Index remains close to its lowest point since November.
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