More global fund managers are turning away from Chinese stocks due to “chronic disappointment” with the economic outlook and market slump, trimming their allocations by the most since April, according to a Bank of America survey, reports the South China Morning Post. Japan remains the undisputed favourite market.
Investors cut the amount of money set aside for Chinese equities by 12 percentage points to the lowest net underweight in more than a year, a reflection of the dire state of affairs, the January survey showed. Some 78% of the survey respondents viewed a structural derating is underway versus about 50% a year ago, justifying the shrinking market valuation.
The Hang Seng Index slumped 3.8% in Wednesday trading, the most since a 6.4% plunge in October 2022. The Hong Kong stock market’s benchmark has lost more than 10% this year in its worst start to a year since 2016. Stocks in mainland China have also lost traction, with the CSI 300 Index trading near a five-year low. “Pessimism in China is all but entrenched now,” the bank said in the report. “Chronic disappointment has turned investors away from Chinese equities.”