Foreign Investors Flock to China, Leaving India's Markets in the Dust

Amid the recent bullish trend in China's A-shares and Hong Kong stocks, foreign capital is shifting focus from emerging Asian markets like India to Chinese equities.

According to data from EFPR, the week ending October 2 witnessed the second-largest capital inflow of the year into emerging market equity funds, with nearly all this capital directed towards China. EPFR Global's research director Cameron Brandt noted the significant scale, with over $13 billion net flowing into the Chinese market that week, marking a historic weekly high.

This shift has caused a noticeable decline in foreign investment in other emerging markets, particularly in India. During the same period, India saw a net inflow of $101 million, less than one percent of China's intake. Brandt attributed this to China's recent economic stimulus plans, which have driven investors to reallocate resources from other regions back to China.

India's NSE Nifty index dropped by approximately 4.5% over the week, its largest decline since June 2022, partly due to revived foreign interest in China. This trend follows China's comprehensive economic support measures, which have enhanced the allure of Chinese stocks for international investors.

Other Asian markets are similarly witnessing outflows. Recent data shows that since the end of September, markets in South Korea, Indonesia, Malaysia, and Thailand have all experienced net outflows. Moreover, funds are being reallocated from Japan as more capital is being directed towards China.

This strategic pivot is exemplified by fund managers and institutional investors enhancing their exposure to Chinese equities. Industry experts forecast that China might sustain its market momentum through continued policy support and investor interest, with some analysts projecting significant potential for Chinese stocks compared to other Asian markets.