Funds that invest in Chinese stocks reported $5.3 billion in outflows globally in the week ended July 15, after record inflows of $13 billion the prior week, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
Stock funds overall attracted $8.3 billion to mark their second straight week of inflows. All of the new money flowed into stock exchange-traded funds. Funds that specialize in U.S. shares attracted $5.2 billion, according to the report, which also cited data from fund-tracker EPFR Global.
Michael Hartnett and Brian Leung, authors of the BofA report, said the crises in Greece, China and Puerto Rico have not prevented a big rotation out of bond and money market funds into equity funds since late May and early June “when a strong May U.S. payroll report reassured investors.”
That said, bond funds attracted $1.1 billion, their first inflows in six weeks.
The withdrawals from Chinese equity funds follow last week’s record China inflows, largely to A-share ETFs on the back of suspected government-support measures conducted by local brokers, Hartnett and Leung said.
“With such a massive influx of investors into the markets as China is currently experiencing, there is bound to be some measure of volatility,” said Brendan Ahern, chief investment officer at KraneShares. “The adoption of margin by investors with little stock market experience struck us as imprudent. We believe overextension of margin was the primary cause of the pullback.”