Chinese authorities have restricted access to a key data source on inward investment as global funds continue to withdraw from the country’s stock market, raising the possibility that 2024 could mark the first year of net equity outflows.
On Monday, daily data tracking net investment flows from foreign funds into mainland Chinese stocks—referred to as “northbound” trades from Hong Kong via the Stock Connect trading link—was no longer made available. Instead, information on foreign stock holdings will now be released quarterly.
This change comes as international investors have withdrawn more than $12 billion from mainland Chinese equities since early June, according to data from the Hong Kong stock exchange. This reversal follows earlier inflows, which many analysts attributed to the offshore branches of state-backed institutions, pushing the year-to-date net flows into negative territory. Since the launch of Stock Connect in 2014, there has never been a full year of net outflows.
“Although data provided by global exchanges can vary, reducing transparency will not help attract foreign investment, especially in an emerging market,” said Gary Ng, senior economist at Natixis. “Investors may question the reasons for this change, making it harder to justify entry into China and make informed investment decisions.”
These new restrictions on investment data come as Beijing struggles to boost market confidence amid concerns about China’s slowing economy and the ongoing crisis in its property sector. In May, Chinese regulators had already halted the dissemination of live trading data on foreign investors’ activities.
The CSI 300 index, which tracks the top companies traded on the Shenzhen and Shanghai stock exchanges, has declined by 1% since the start of the year, as the rally that began in late February has lost momentum. In contrast, Wall Street’s S&P 500 has risen by 17%, and India’s Nifty 50 index has gained 13%.
Historically, Chinese authorities have restricted access to data that could be seen in a negative light. Last year, regulators prevented some fund houses from displaying the estimated net value of mutual funds, and Beijing also ceased publishing youth unemployment data as the rate reached record highs.
Authorities have also attempted to support markets by instructing some domestic financial institutions not to be net sellers of stocks on certain days, using private directives known as “window guidance”. Analysts say this approach has resulted in declining liquidity and lower trading volumes in the A-share market.
“In the past two or three years, foreign investors have been much more tactical with their onshore positioning in China,” said Jason Lui, head of Apac equity and derivative strategy at BNP Paribas.
Lui added that while investors remain bullish on emerging markets like India, they are increasingly excluding China from investments using “EM ex-China” benchmarks.
“If the current trend continues, we could see the first annual outflows from China A-shares since the inception of Stock Connect,” Lui noted. “However, significant policy measures could still bring investors back.”