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Investors Have Chosen to Stay Away from China ETFs

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Aug. 18 2020, Updated 4:44 a.m. ET

Fund flows to China ETFs

Concerns of a Chinese market slowdown have been plaguing investors since the beginning of the year. These fears turned into panic when China announced the devaluation of its currency to boost its exports.

In response, investors have been pulling money out of Chinese equities. Since July, investors have withdrawn $639 million from the iShares China Large-Cap ETF (FXI). In comparison, emerging market ETFs (EEM) have witnessed outflows of $3.4 billion during the same period. Much of this is attributable to a flight of capital to developed markets after the China’s market collapse and Brazil’s downgrade.

However, so far in 2015, flows to the iShares China Large-Cap ETF remain positive. Year-to-date, investors have poured $876 million into the ETF. Between March to June, it has witnessed inflows of $1.71 billion despite negative sentiments about China.

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Institutional investors

During the second quarter, 13F filings of major institutional asset managers displayed an increase of 19.78% in trade activity. Among the 361 13F filers holding the stock, 28 have it in their top ten holdings. Of these, 85 funds added fresh positions of FXI, while 99 funds increased their holdings. However, 55 funds closed out their positions and 99 funds reduced their holdings of FXI.

Asset management companies such as Allianze Asset Management, Graticule Asia Macro Advisors, Nomura, and Credit Suisse (CS) have increased their exposure to FXI. On the flip side, Goldman Sachs (GS), Moore Capital Management, Morgan Stanley (MS), and Capstone Advisory Group have significantly reduced their exposure to FXI.

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