‘Baton getting handed over’: Global investors turn their back on China, start pouring more cash into US

While China’s economy weathered the coronavirus storm much better than the rest of the world, investors are now betting more on US stock funds than Chinese ones, new research from EPFR Global reportedly shows.

China became a key destination for foreign investment in 2020, when the coronavirus pandemic triggered a panic sell-off in the stock markets. The world’s second-largest economy was the first country to suffer from Covid-19 and impose massive lockdowns, but it also overcame the aftermath of the crisis faster than others. That paved the way for economic growth while most major economies suffered a downturn.

However, this year investment sentiment has changed, putting the US ahead of China again, according to CNBC citing EPFR, a data fund tracker which provides fund flows and asset allocation information to financial institutions around the world. The company’s data shows that net cumulative flows to US stock funds turned from negative to positive after the US presidential election in November, and hit $170 billion in the week ending April 7.

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Meanwhile, inflows to Chinese assets slowed and started to fall behind US levels. According to the report, net cumulative flows to Chinese stock funds amounted to $29.78 billion during the same week.

The director of research at EPFR, Cameron Brandt, told CNBC that investors’ interest in both US and Chinese funds has significantly jumped since the middle of last year, but interest in the former eventually “came roaring back.”

“The baton seems to be getting handed over,” Brandt said. He explained that investors bet on US in the short term due to massive stimulus measures, while China is expected to adopt more prudent monetary policy.

However, the analyst still expects that funds will not stop buying Chinese assets, as strong demand from retail investors has not waned. Brandt believes that the trend is set to continue as it would take an extreme event to change that, as happened during the Chinese stock market meltdown in 2015.

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