Exchange-traded fund (ETF) investors are showing little confidence that the world-beating rally in China’s domestic stock market will last.
Traders pulled about US$845 million from the CSOP FTSE China A50 ETF in the two weeks through Friday last week, the biggest outflow since the US$5.7 billion fund was started in 2012, according to data compiled by Bloomberg.
The US$9.7 billion iShares FTSE A50 China Index ETF lost US$585 million last week, the most since 2009, as the Shanghai Composite Index rose to a three-year high.
Investors in the two largest ETFs tracking Chinese shares are retreating after the Shanghai gauge jumped 11 percent in the past month, the top performance among 93 benchmark indices tracked by Bloomberg.
Chinese stocks are valued at the biggest premium over their Hong Kong counterparts in 16 months after China opened up its market with the Shanghai bourse link and the Chinese central bank unexpectedly cut interest rates to combat the weakest expansion since 1990.
“We’ve seen signs of slower economic growth from China in recent weeks,” Todd Rosenbluth, director of mutual-fund research for S&P Capital IQ in New York, said by telephone on Monday. “Investors want to reduce their exposure.”
The Shanghai Composite fell for the first time in eight days yesterday, losing 0.1 percent after a gauge of Chinese manufacturing dropped last month to its lowest level since March.
The stock benchmark advanced 7.9 percent last week, the most since October 2010, after the central bank cut borrowing costs for the first time in two years.
The Shanghai index climbed 3.1 percent at the close yesterday, while the Hang Seng China Enterprises Index of Hong Kong-traded shares gained 2.8 percent.
Overseas investors had used the two Hong Kong-listed ETFs to gain exposure to the Chinese market since April, when the Chinese government unveiled a plan to give anyone with a Hong Kong brokerage account the ability to trade Shanghai shares.
The Shanghai index has gained 28 percent since then, pushing the premium for shares of dual-listed companies to 10 percent over their Hong Kong peers yesterday. That is the biggest gap since July last year and a reversal from four months ago, when Chinese stocks traded at a discount of 11 percent, data compiled by Hang Seng and Bloomberg showed.
Investors started withdrawing money from the two Chinese ETFs in mid-October after adding a combined US$3.5 billion over the previous four months.
Taiwanese suppliers to Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) are expected to follow the contract chipmaker’s step to invest in the US, but their relocation may be seven to eight years away, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. When asked by opposition Chinese Nationalist Party (KMT) Legislator Niu Hsu-ting (牛煦庭) in the legislature about growing concerns that TSMC’s huge investments in the US will prompt its suppliers to follow suit, Kuo said based on the chipmaker’s current limited production volume, it is unlikely to lead its supply chain to go there for now. “Unless TSMC completes its planned six
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said second-quarter revenue is expected to surpass the first quarter, which rose 30 percent year-on-year to NT$118.92 billion (US$3.71 billion). Revenue this quarter is likely to grow, as US clients have front-loaded orders ahead of US President Donald Trump’s planned tariffs on Taiwanese goods, Delta chairman Ping Cheng (鄭平) said at an earnings conference in Taipei, referring to the 90-day pause in tariff implementation Trump announced on April 9. While situations in the third and fourth quarters remain unclear, “We will not halt our long-term deployments and do not plan to
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
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