(Corrects story to remove extraneous dateline; no other changes to the text)
By Georgina Lee and Summer Zhen
HONG KONG, Oct 17 (Reuters) – Cash is leaving China's financial markets at the fastest clip in years as investors flee a falling currency and sputtering economy, and analysts point to hints that more money is being moved out of the country along back channels in a further sign of flagging confidence.
The flows, mostly out of the bond market, reflect the attraction of higher interest rates elsewhere.
But their size and signs that they are spreading beyond foreigners' portfolios highlights fragility in domestic confidence – a potential drag on the yuan in future – and the magnetic effect of a rising U.S. dollar on global capital flows.
"Everyone is suffering from the storm of U.S. interest rate rises," said wealth manager Liu Yuan. "U.S. dollar assets are in the eye of the storm. It's a haven of breeze and sunshine (while) life is hard on the periphery."
Officially, China's national financial accounts, which cover stock and bond markets and direct investment flows, show a net $101 billion was pulled out over the six months to June, putting 2022 on track to record the largest annual such outflows since 2016.
Monthly debt market data shows foreign investors have been net sellers for seven straight months to August as what had been a lucrative yield premium in China vanished as U.S. interest rates soared.
To be sure, exports mean China's current account balance is still positive and not every asset class is seeing outflows – with equities actually attracting modest inflows.
But a sizable $45.2 billion net outflow in the balance of payments under the category as "errors and omissions," has some economists suspecting that money is being moved out of the country via illegal or semi-legal channels.
"Errors and omissions basically reflects the exit of residents' money in an unofficial way," said Alicia García Herrero, chief Asia economist at French bank Natixis.
"It's not just foreign asset managers no longer investing in China, it's the unrecorded outflows that are worsening," she said as confidence wavers. "People want to bring their money out."
The yuan has depreciated more than 11% on the dollar this year.
Unlike most of its global peers which are rapidly tightening policy to tame red-hot inflation, China is cutting lending rates to support its sharply slowing economy. The housing market, where most Chinese have their largest assets, is in a sharp downturn, and youth unemployment has hit record highs.
GIMME SHELTER
Amid foreign investors' exodus, there are signs of locals following as fast as allowable under capital controls that were tightened after the previous season of heavy outflows in 2016.
Outbound investment under the cross-border Bond Connect, which links mainland China with Hong Kong and global markets, totalled 301.5 billion yuan ($42 billion) at the end of August, up 34% from a month earlier and up 19-fold since March.
"All types of assets are falling this year, expect for a few money type products pegged to the U.S. dollar," said Liu Yaolong, marketing manager at GaoTeng Global Asset Management which has been promoting such funds to Chinese investors.
Quota-based schemes allowing onshore investors access to foreign markets and products are also increasingly popular.
Subscriptions for the Qualified Domestic Institutional Investor (QDII) scheme are up 80% in the eight months to August to 322.8 billion fund units.
A survey published recently by HSBC also showed that 85% of investors who have money in foreign products via a cross-boundary Wealth Management Connect Scheme, planned to invest more in the next 12 months.
BACK CHANNELS
Signs of unrecorded flows are more difficult to detect, and the "errors and omissions" data in the national accounts is inconclusive. Moving money is also very difficult as COVID-19 curbs on travel add another layer to capital controls.
Still, migration can provide an excuse for shifting cash, and brokers have noticed a surge in enquiries about studying.
Data from consultancy Education International Cooperation showed a 41.5% jump in queries about study in Hong Kong between January and July, compared with the same period a year earlier.
Family offices abroad can also become hubs for global investing. About 300 new family offices opened in Singapore last year, according to the Monetary Authority of Singapore.
Investors from Hong Kong, Macao, and Guangdong province accounted for 44% of newly set up family offices in Singapore for the first four months this year, up from 39% for all of 2021, according to Chinese language newspaper Lianhe Zaobao in Singapore.
Purchasing insurance products in Macau, where the border with the mainland remains open, has been another popular back-channel that is anecdotally seeing renewed interest. The products purchased by mainland visitors are usually denominated in U.S. dollars, providing a hedge against a weak yuan, and carry an attractive long-term yield.
Agents involved say persistent lockdowns and uncertainty over China's property market are also factors besides the weakening currency. If they were to persist, opening China's borders could unleash fresh flows and currency selling.
"I won't say renminbi depreciation is the only trigger," said an agent for insurer AIA, who requested anonymity as the topic is sensitive. They expect a rush to Hong Kong products when the border between Hong Kong and the mainland reopens. ($1 = 7.1741 Chinese yuan renminbi) (Reporting by Shanghai newsroom and Georgina Lee and Summer Zhen in Hong Kong; Writing and additional reporting by Tom Westbrook; Editing by Kim Coghill)
Related Quotes
The Indian rupee on Monday held a narrow trading range once again as the Reserve Bank of India's likely intervention last week discourages speculators. The "RBI may continue its protection of certain levels," said Anil Bhansali, head of treasury at Finrex Treasury Advisors. Treasury yields, both longer- and shorter-term, were hovering just below multi-year highs.
Heidi Klum is celebrating a big milestone on Instagram, but she’s not doing it with balloons or confetti. She found a much sexier way to honor hitting 10 million followers on the social media platform: hot-pink lingerie. The 49-year-old supermodel posted an Instagram Reel that might take the cake for being one of her popular […]
(Bloomberg) — President Xi Jinping proclaimed on Sunday that Taiwan’s status should be “settled by Chinese people.” Yet he faces a tricky balancing act managing public opinion among China’s 1.4 billion people on an issue that looks set to dominate his third term.Most Read from BloombergRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesStocks Snap Back After Selloff With UK’s Reversal: Markets WrapThe Time to Buy the Dip Is Fast Approaching — for One CountryNATO-China Tension Over Ukraine F
"China's Choice" is a line of an attack in Orange County, where Michelle Steel and Jay Chen battle in one of the most heavily AAPI districts.
BERLIN (Reuters) -Pilots at Lufthansa's Eurowings began a three-day strike on Monday over working hours, their union said, confirming action that could affect thousands of the budget airline's passengers. The union wants the carrier to ease pilot workloads through measures such as increased rest periods, but Eurowings warned over the weekend that the demands put jobs at risk. The airline had said it would cancel nearly 170 of about 400 scheduled flights at airports in Duesseldorf, Cologne, Hamburg and Stuttgart on Monday, affecting roughly 20,000 travellers.
(Bloomberg) — Global Digital Niaga PT, the owner of e-commerce group Blibli, is set to raise up to 8.17 trillion rupiah ($530 million) through an initial public offering, poised to be Indonesia’s second-largest this year.Most Read from BloombergRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesNATO-China Tension Over Ukraine Flares at Conference in IcelandAbout 98% of S&P 500 Stocks Rise as US Yields Sink: Markets WrapThe Time to Buy the Dip Is Fast Approaching — for One CountryThe firm is
SHANGHAI (Reuters) -China's central bank rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a second month on Monday, reinforcing expectations that conditions will continue to stay loose to help the pandemic-hit economy. The People's Bank of China (PBOC) kept the rate on 500 billion yuan ($69.6 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions at 2.75%, unchanged from the previous operation. Monday's liquidity injection was to "keep banking system liquidity reasonably ample" and to "fully meet financial institutional demand," the PBOC said in an online statement.
(Bloomberg) — Fosun International Ltd. agreed to sell its stake in the parent company of Nanjing Iron & Steel Co. for 15 billion yuan ($2.1 billion), according to people familiar with the matter, as one of China’s largest non-state conglomerates disposes assets for debt repayment.Most Read from BloombergRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesNATO-China Tension Over Ukraine Flares at Conference in IcelandAbout 98% of S&P 500 Stocks Rise as US Yields Sink: Markets WrapThe Time to
New U.K. Treasury Chief Jeremy Hunt said he is reversing nearly all the government’s proposed tax cuts and would pare back an energy price cap as he moves to reassure markets about the stability of the nation’s finances.
The S&P 600 small-cap index is on pace to outperform the S 500 this year for the first time since 2016.
Richard McGregor, Lowy Institute Senior Fellow for East Asia, debriefs on his takeaways from Chinese President Xi Jinping's speech that opened the 20th China Communist Party Congress. He speaks on "Bloomberg Daybreak: Australia" with Haidi Stroud-Watts and Kathleen Hays.
STORY: Chinese President Xi Jinping opened the 20th Communist Party Congress, a week-long event where he is widely expected to win a third leadership term and cement his place as the country's most powerful ruler since Mao Zedong.In Dharamsala, protesters including, monks, students, parliamentarians among other marched with flags, banners and posters as they raised their voices against Xi.In his decade in power, Xi has set China on an increasingly authoritarian path that has prioritised security, state control of the economy in the name of "common prosperity", a more assertive diplomacy, a stronger military and intensifying pressure to seize Taiwan.In particular, China has in recent days repeatedly emphasised its commitment to Xi's zero-COVID strategy, dashing hopes among countless Chinese citizens as well as investors that Beijing might begin exiting anytime soon a policy that has caused widespread frustration and economic damage.
(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.Most Read from BloombergRussia Hits Ukrainian Capital Kyiv With Kamikaze DronesStocks Snap Back After Selloff With UK’s Reversal: Markets WrapThe Time to Buy the Dip Is Fast Approaching — for One CountryNATO-China Tension Over Ukraine Flares at Conference in IcelandCitigroup calls it a “head scratcher.” Goldman Sachs terms it “striking resilience.” For Columbia Threadneedle, it’s a “rew
Chinese President Xi Jinping is expected to tighten his grip on power when China’s National Party Congress convenes Sunday.
Kyiv was reported to be under attack Monday as the office of President Volodymyr Zelenskyy said Russian forces were using "kamikaze drones" against Ukraine.
PARIS (Reuters) -Renault and Stellantis unveiled new French-made electric vehicles (EVs) at the Paris Motor Show on Monday, as President Emmanuel Macron announced bigger subsidies for poorer families to buy EVs and pushed for more local production. In an interview with business daily Les Echos before visiting the show, Macron said EV subsidies for lower-income households would rise to 7,000 euros ($6,826) next year from 6,000 euros, while falling to 5,000 euros for other French buyers.
Shares of the semiconductor company Nvidia (NASDAQ: NVDA) were jumping this morning on seemingly no company-specific news. Instead, the tech stock is likely moving higher today as investors regained some optimism in the market today, perhaps after two banks beat earnings expectations. As a result, the S&P 500 was up 2.7%, the tech-heavy Nasdaq Composite was up 3.3%, and Nvidia's shares had gained 4.3% as of 10:48 a.m. ET.
Every investor in Mullen Automotive, Inc. ( NASDAQ:MULN ) should be aware of the most powerful shareholder groups. And…
Stocks jumped out to a strong start to the new week as investors took some solace from measures taken internationally to calm bond markets in Europe and elsewhere. As of 10 a.m. ET Monday, the Nasdaq Composite (NASDAQINDEX: ^IXIC) was leading the way higher, climbing by more than 3%. Adding to the already considerable volatility that investors have become accustomed to lately, third-quarter earnings season is ramping up, and some much-watched companies are on tap to reveal their latest financial results this week.
The tech-heavy Nasdaq was leading the charge, with electric vehicle (EV) growth stocks like Rivian Automotive (NASDAQ: RIVN) and Lucid Group (NASDAQ: LCID) rising as much as 6% and 8.7%, respectively. EV start-up Canoo (NASDAQ: GOEV) was an even bigger gainer. As of 10:50 a.m. ET, Rivian was still higher by 5.9%, Lucid by 6.8%, and Canoo by 18%.