Funds keep away from Chinese stocks

The Financial Times reports fund managers have built up their largest underweight position in Chinese stocks for at least six years. The unusually large bet against the Hong Kong, Shanghai and Shenzhen markets is a sign of mounting western wariness as to the health of the world’s second-largest economy, which has seen its foreign reserves slide by $1tn since June 2014 despite increasingly desperate attempts to staunch a tide of capital outflows. “There is still a concern about the banking system, tied to issues with the property market and potential issues with the provincial debt market, and we are, it seems, in the early stage of a bad debt cycle,” said Edward Lam, lead fund manager of the MI Somerset Emerging Markets Dividend Growth Fund, which has just 2.5% of its portfolio in Hong Kong and Chinese stocks. Lam pointed particularly to non-performing loans as a problem.