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China Stock Market Booms in June as Foreigners Exit Bonds

China bonds registered $2.5 billion of outflows last month, the fifth consecutive month of foreign outflows, but over $9.1 billion of foreign inflows went into China’s stock market in June, the IIF said


China stock market
Overseas investors have been reducing holdings of Chinese bonds since February, as diverging monetary policies kept Chinese yields pinned below their US counterparts. File photo: AF.

 

Foreign investors continued to sell out of Chinese bonds in June but boosted China’s stock market, according to Institute of International Finance (IIF) data.

China bonds registered $2.5 billion of outflows last month, compared with $9.1 billion of inflows in other emerging markets, the institute said.

That would be the fifth consecutive month of foreign outflows from China’s $20 trillion bond market.

Meanwhile, there were more than $9.1 billion of foreign inflows to China’s stock market, compared with outflows of $19.6 billion in other EM markets, according to the IIF.

The China stock market rebounded more than 6% in June, on economic stimulus measures by Beijing and eased Covid-19 restrictions.

 

Chinese Economic Outlook In Focus

“For the coming months, several factors will influence flow dynamics, among these the timing of inflation peaking and the outlook for the Chinese economy will be in focus,” the IIF report said.

Overseas investors have been reducing holdings of Chinese bonds since February, as diverging monetary policies kept Chinese yields pinned below their US counterparts.

The People’s Bank of China has been easing policy to aid the economy, while the US Federal Reserve has been raising rates to fight inflation.

Last week, China took fresh steps to lure foreign bond investors, saying it would cut service fees, improve overseas access to foreign exchange hedging and streamline the process of opening accounts.

China also announced plans for a new risk-hedging tool for overseas investors in its bond market.

 

 

  • Reuters, with additional editing by George Russell

 

 

READ MORE:

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Hong Kong Props Up Local Currency Amid Capital Outflows

 

 

George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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