Disillusioned with a weak stock market at home, geopolitical risks and a falling currency, Chinese investors are pouring money into investment products with exposure to overseas assets that will also help diversify their portfolios.
Retail money has gushed into exchange traded funds (ETFs) and mutual funds issued under the Qualified Domestic Institutional Investor (QDII) programme, one of the few channels for Chinese money to be invested abroad, leaving managers of these funds scrambling for more quotas under the strictly managed scheme.
Those investing in QDII products are no longer content staying close to home in Hong Kong equities but are seeking funds that give them access to U.S, Japanese and even emerging markets such as Vietnam and India as the Chinese economy stumbles, analysts said.
A record 38 QDII funds had been launched this year until August 17, outpacing the 31 funds launched in 2022, Morningstar data shows.
"Demand for U.S. stocks has emerged since late last year and has strengthened this year due to the lucrative returns. The Nasdaq ETF sold exceptionally well," said Ivan Shi, head of research at Shanghai-based fund consultancy Z-Ben Advisors.
The total QDII quota of roughly $165.5 billion is almost used up, and there is demand for more, fund managers say, as domestic investors seek alternatives to falling stock and property values at home.
Money has been leaving China's shores all year, not just through QDII funds but also its Stock Connect and Bond Connect links with Hong Kong, complicating authorities' efforts to stabilise the yuan and revive confidence.
The blue chip CSI300 index is among the world's worst-performing major indexes this year, down roughly 2%, after tumbling 22% in 2022. The yuan is down more than 5% against the U.S. dollar this year.
In contrast, the Dow Jones Industrial Average is up 4.3% and Nasdaq has jumped roughly 30%.
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