Overseas Chinese equity funds see big inflows after stimulus measures

Foreign exchange-traded funds (ETFs) focusing on Chinese equities received massive inflows in the past three days, buoyed by optimism following aggressive stimulus measures announced by Beijing last week.

According to LSEG Lipper data, foreign equity ETFs received inflows of USD 2.4 billion in the last three trading sessions of September. The same funds had seen outflows of USD 2.7 billion from the start of the year up to Sept. 25.

Over those three trading sessions, the Xtrackers Harvest CSI 300 China A-Shares ETF attracted approximately USD 518.21 million in inflows, while the iShares Core CSI 300 ETF RMB and the iShares China Large-Cap ETF FXI saw net purchases of USD 302.3 million and USD 295.8 million, respectively.

China’s stock markets surged after Beijing introduced a flurry of stimulus measures last week, including substantial rate cuts and fiscal support, aimed at revitalizing the sluggish economy and boosting the beleaguered market.

On Monday, the CSI300 blue-chip index surged 8% to its highest level in over a year, clocking a 25% rise in five trading days.

The index climbed nearly 21% in September, rebounding from previous declines caused by China’s struggling economy, which had weighed on stocks, fueled capital flight and driven investors towards safer assets.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said Chinese equities have potential for further gains, but sustained reforms are necessary to maintain the rally.

“Part of our own optimism this time around reflects our anticipation of significant additional fiscal and monetary support, including 50-100 basis points of cuts to banks’ reserve requirement ratio and 20-50bps of policy rate cuts by end first-half 2025,” he said.

“We also anticipate multiple rounds of fiscal stimulus worth 2-5 trillion yuan, focused on affordable housing and investing in social welfare.”

(Reporting by Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan and Hugh Lawson)