Foreigners Dump China A-Shares, Giving Possibility of Investing in MSCI Thailand Instead!

As the weight inclusion of China A-shares by MSCI will probably kick in soon, a lot of investors, who digested the news since early this year, were in high alert. However, Reuters has reported that foreign buying of Chinese stocks has slowed significantly since March and turned negative in April, as investors worried that Beijing is turning more cautious about further stimulus amid signs that the economy is starting to stabilize.

 

Uncertainty over Sino-U.S. trade talks has also played a part in shifting global appetite for Chinese equities, with the country’s major indexes taking a beating this week after the new tension between the two countries.

China’s stocks fell the most in more than 3 years on the first trading session of May, as investors scrambled to dump stocks amid a fresh deterioration in Sino-U.S. trade relations.

 

Chinese markets had rallied earlier in the year on expectations of more stimulus for the cooling economy, and on signs that Beijing and Washington were making progress in talks to end their trade war.

However, investors began to temper their policy easing views after surprisingly upbeat March data, though weak April readings suggest the economy is still trying to find its footing.

Zhang Gang, an analyst with China Central Securities, said it was natural for foreign investors to reduce holdings after the robust rally early in the year, given uncertainties including the Sino-U.S trade talks, U.S.-EU trade tensions and Brexit.

 

Foreign capital inflows could return as China further opens up its capital markets, Yan Kaiwen, an analyst with China Fortune Securities said.

Global index provider MSCI is quadrupling the weighting of Chinese mainland shares in its global benchmarks later this year, a move it said might draw more than $80 billion of fresh foreign inflows to the world’s second-biggest economy.

The index provider will increase the inclusion factor of Chinese large-cap stocks to 20% from the current 5% in three steps, with increments of 5% in May, August and November.

CENTEL, RATCH, INTUCH and DTAC will be added into MSCI Thailand Index later this month, and also a weight increase which will result in about 2.4 billion dollars or 76 billion baht of fund inflows. Though the economy is slowing down, if foreign investors have been dumping Chinese shares, could that mean some will turn to Thai shares?