Foreign investors are fleeing China's stock market rally

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Whether its profit-taking, the perception of increased risk, or both, foreign investors are fleeing China’s stock market.

ANZ, in a research note released this afternoon, have revealed that investors yanked $US2.683 billion from China’s stock market last week following an outflow of $US740 million in the previous week.

According to ANZ researchers HuiYing Chan and and Irene Cheung, “foreign investors remain cautious on Chinese stock’s high valuation, despite PBoC’s interest rate cut on 10 May which has boosted stock prices”.

It appears investors are viewing increased policy stimulus as a sign of economic weakness rather than a reason to buy stocks, at least according to Chinese equity flows of late.

Today the Shanghai Composite is down 1.44%, leaving its 12-month return at only 110.7%.

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