Latest data gathered by Global SWF shows that most state-owned investors (SOIs) pivoted away from China in their public equity strategies.
The MSCI China A Shares ETF fell 15.4% in Q1 2022, while the MSCI China A International Index fell 13.8%. Yet, the consolidated Chinese A share holdings of SOIs – including sovereign wealth funds and public pension funds – declined 22.8% q-o-q to US$7.1 billion. The most significant declines were seen in the positions of Singapore’s GIC (-32% to US$1.4 billion), CPP Investments (-27% to US$360 million) and CDPQ (-21% to US$276 million).
Norges Bank, which behaves like a passive global index tracker with a 1-2% holding in most global equities, saw the value of its China A-shares portfolio fall 19% to US$1.2 billion. As such, the decline in the value of holdings by GIC (-32.0%) and CPP (-26.6%) indicated a strategic pivot away from Chinese public equities.
At the same time, there were SOIs that appeared to maintain their positions such as the Abu Dhabi Investment Authority (-13.5%), Kuwait Investment Authority (-15.1%) and Ontario Teachers (-16.3%).
It is likely that the rout of Chinese stocks in Q122 has been has reversed in Q222 as investors gain confidence in Beijing’s ability to secure an economic recovery. China's ability to withstand challenges from US economic fluctuations was affirmed by China's improving economic data and the Chinese government's forceful rollout of supportive policies to help the economy get back on track.
Chinese stock market resilience is set to reflect global investor confidence in China's economy, as they are pouring capital into the market due to lower risk. As such, the pivot away from Chinese stocks in Q122 is likely to be more tactical than long-term strategic – albeit dependent on China’s economic performance relative to European and US markets.
Chinese efforts to boost an economy blighted by repeated coronavirus lockdowns and upset by the crackdown are set to boost the stock market. The return of international demand for Chinese stocks breaks from the situation in Q1 when lockdowns caused economic damage, alongside the geopolitical fallout from Russia’s invasion of Ukraine and China’s tech crackdown.