China might experience its first yearly outflow from its stock market in 2024. However, investors may not be able to track these movements through exchange data.
Starting Monday, China’s stock exchanges will stop publishing daily data on overseas fund flows. This change removes a crucial tool for tracking the US$8.3 trillion market.
This decision, which was first suggested in April, comes as foreign funds have been steadily withdrawing from the Chinese market. As of August 16, year-to-date figures show a negative trend. Analysts view this move as another measure by authorities to stabilize the market, aiming to lessen the impact of high-frequency data and shift investor focus to longer-term indicators.
“Beijing stopped the release because the data has been unfavorable and volatile,” said Xin-Yao Ng, director of investment at abrdn Asia Ltd. “They likely want to prevent the data from exacerbating capital outflows. However, this doesn’t address the underlying issues,” he added.
If the trend of selling continues, China may face its first annual outflow from its stock market since 2016, when Bloomberg started tracking purchases through trading links with Hong Kong.
With daily data no longer available, investors will have to rely on quarterly reports from the central bank, which track the value of equities held by foreigners through broader channels rather than daily flows. These reports are subject to delays.
The CSI 300 Index has dropped more than 9% since its peak in May, as hopes for an earnings recovery failed and policy support fell short. With a 2.5% decline for 2024, the index risks extending losses into a record fourth year, lagging behind the approximately 13% gains seen in Japan’s Topix Index and India’s Nifty 50.
Despite significant investments by state funds—estimated at US$66 billion in exchange-traded funds this year—stocks have struggled. Recent data showed a surprising slowdown in fixed-asset investment and a decline in industrial production.
Global investors may also shy away from China ahead of the US presidential elections, with increasing anti-Beijing rhetoric and potential trade measures.
“Market sentiment remains stagnant as more disappointing economic data is released and policy adjustments appear reactive,” wrote Morgan Stanley analysts, including Laura Wang, in a note on Thursday. “We expect continued high market volatility and recommend a defensive investment position in the near term.”
The latest policy follows the end of daily intraday flow data disclosures in May and last year’s request for fund houses to cease displaying real-time net value estimates of mutual fund products.
Under the new rule, exchanges will only publish daily data on total turnover, number of trades in stocks and exchange-traded funds via Hong Kong links, and turnover for the top 10 most active securities. The total number of shares held through these links will be reported quarterly.
Real-time data for flows from mainland China to Hong Kong, known as southbound data, will continue to be available after the August deadline.
