China Retail Investors Shun Equity Funds as Stocks Stumble
(Bloomberg) -- A choppy start to the new year for Chinese stocks is driving investors further away from equity mutual funds.
New equity-focused funds raised 9.6 billion yuan ($1.5 billion) in the first nine days of 2022, just a 10th of what was seen in the year-earlier period. Retail sentiment toward stock funds has soured since demand peaked in early 2021, as a volatile regulatory environment and uncertain economic outlook dampened appetite for risk assets.
The benchmark CSI 300 Index slipped 2.4% in the week ended Jan. 7, the most since mid-September. The ChiNext Index fell for a seventh straight day on Tuesday, and has lost more than 7% in this period.
Fundraising will probably remain low through the month until investors receive year-end bonuses and have some spare cash to park.
“Disappointing fundraising figures in the first week this year mean that a rebound might not be seen until after the Chinese New Year,” Cinda Securities analysts including Fan Jituo wrote in a Sunday note.
The losses in Chinese stocks are partly due to an unraveling of some of last year’s popular trades. Investors have been migrating out of the hottest plays of 2021 as a policy pivot to supporting growth is expected to benefit low-valuation stocks, while higher global rates have triggered a selloff in tech shares.
As such, last year’s fund champions are seeing a reversal in their fortunes. The First Seafront Public Utilities Industries Equities Fund, which clocked 119% in returns and triumphed over more than 1,000 peers, has seen a 12% drop in returns at the start of 2022.
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