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Investors make a U turn

Investors make a U turn

Last Updated: ‎‎‎‎‏‏‎ ‎
January 24, 2023
Sharp reversal in Investors’ China sentiment from 2 months ago

This weeks update is co-authored with Novia Raihanah (our Head of Data Operations)

Equities also joined the ‘sell’ party this week

In last week’s update we had mentioned about Investors selling Fixed Income and buying Equities. This week, Equities also joined the Fixed Income selling spree (which is already in it’s 6th week now).

Bulk of the Equity selling came in Funds, with some net selling seen in direct Equities as well. This is the first time in more than 2 months that we saw selling on both direct Equities AND Funds in the same week (see chart below)

Net Selling of direct Equities AND Equity Funds for the first time in more than 2 months

All Equity selling is China related

However if we look a little deeper at what Equities and Equity Funds were sold, we find that it is all China related (and US equities actually saw buying). This itself is not surprising giving the recent regulatory crackdown.

Selloffs in Equity Funds have been especially vicious, with what can only be called a massacre in USD-denominated China-focused ETFs, compared to their usual volumes(see chart below)

Investors have been de-risking International Funds for some time. This week we saw significant selling of China focused funds as well

This Investor behavior (i.e. sell China, buy US) is consistent with market price action. Both Hong Kong’s Hang Seng Index and mainland’s CSI 300 Index have taken a beating. This is in contrast with the Dow Jones Industrial Average and S&P 500, which both briefly touched an all-time high.

Selling of HK listed direct Equities as well (US equities continued to be bought)

The ‘Sell China, Buy US’ trend is also neatly displayed in the weekly currency Buy/Sell of Equities chart (see above). As you can see from the chart, HKD equities were sold while USD and EUR equities were bought.

Amongst HKD denominated stocks Financials and Communication lost their shine

Zooming in on only the HKD denominated equities, we see a clear change in sentiment for 3 sectors i.e. Financial, Communications, and to a lesser extent, Technology. Past week being the biggest sell off in these sector for some time.

Meanwhile, for USD-denominated stocks it is business as usual. Notably, Financial and Communication sectors continue to be popular in the US. However, a slowdown in buying was finally seen last week for the U.S. Technology stocks.

Conclusion (tl;dr)

  • Sustained selling still seen in Fixed Income market, and the selling have now spread to the Equity market
  • Sell offs have been primarily China-related, in both the Equity and Equity Fund markets
  • Huge selling of Chinese ETFs was seen, along with a reversal in popularity for HKD-denominated Financial and Communications stocks
  • U.S. stocks are still being bought

Please note that this newsletter is just a data analysis of actual investor behavior and does not constitute investment advice in any form.

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