Chinese shares have experienced a nasty correction, but foreign investors have clearly seen it as a buying opportunity rather than a reason for panic. According to Citi’s Fun With Flows report, last week saw a substantial pick up for foreign investment inflows into Chinese stocks .
Elaine Chu @ Citi: The 7.4% decline in MXASJ in the week ended last Wednesday enticed foreigners to put more money into Asian equity funds. As per EPFR, US$371m of inflows last week were 13x of the amount in the prior week. In the past when such sizeable correction took place in a week, flows tended to get weaker if not negative.
Moreover, China was essentially the only major emerging market to receive fund inflows:
Amongst all emerging market equity funds, Asian funds were the only one receiving net cash last week. GEM funds saw the largest outflows of all, followed by Latin American funds. Flows to Global/International funds that geared investment in developed markets fell to an 8-month low of US$331m, which was even smaller than inflows to Asian funds last week.
(Via Citi, Fun With Flows, Elaine Chu, 1 February 2010)