China Obscures Market Data Amid Potential First Annual Equity Outflow Since 2016
China’s stock exchanges will stop releasing daily data on overseas fund flows starting today. This move comes as foreign investors have been steadily withdrawing from the Chinese equity market, potentially leading to the first annual outflow since 2016 when Bloomberg began tracking such data.
The decision, first hinted at in April, is seen by analysts as an attempt by Chinese authorities to stabilize market sentiment and reduce volatility caused by high-frequency data releases. Instead, the focus is expected to shift towards longer-term indicators. However, critics argue that this change doesn’t address the underlying issues causing the outflows.
The CSI 300 Index, a key benchmark for Chinese stocks, has fallen over 9% from its May peak and is down 2.5% for the year 2024. This poor performance contrasts sharply with gains seen in other Asian markets, such as Japan’s Topix Index and India’s Nifty 50, which have risen around 13% in local currency terms.
Despite massive purchases by state funds, estimated at $66 billion in exchange-traded funds this year, Chinese stocks have continued to struggle. Recent economic data has been disappointing, showing a surprise slowdown in fixed-asset investment and softening industrial production.
Global investors may find additional reasons to avoid Chinese equities in the lead-up to the US presidential elections, as anti-Beijing rhetoric and unfavorable trade measures are expected to intensify.
With the new data restrictions, investors will now have to rely on quarterly reports from the central bank for information on financial assets held by overseas entities. These reports, however, are subject to a time lag and measure the overall value of foreign-held equities rather than specific flow data.
The recent decision is part of a broader trend by Chinese regulators to restrict market data availability. Previous measures include the discontinuation of intraday flow data reporting through trading links earlier this year and last year’s directive to fund managers to cease publishing real-time estimates of mutual fund product values.
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