Funds that invest in Chinese stocks this week reported $5.3 billion in outflows, partly reversing record inflows of $13 billion a week earlier, said Bank of America Merrill Lynch.
Funds that focus on U.S. stocks received $5.2 billion of inflows, the biggest portion of the $8.3 billion that equity funds lured worldwide, according to the bank which cited data from EPFR Global.
Greece’s financial crisis, China’s stock-market plunge and Puerto Rico’s missed debt payment “have not prevented a big rotation out of bond and money-market funds into equity funds since late May, early June,” Michael Hartnett and Brian Leung, BofAML investment strategists, said in
the July 17 report obtained by Newsmax Finance.
China this month took steps to halt a 30 percent plunge in the
Shanghai Composite Index of stocks that destroyed $3.2 trillion of market value. Those measures culminated with a July 8 order by the China Securities Regulatory Commission for some shareholders to stop selling stock for six months.
China’s monetary authorities are losing credibility among investors in their futile struggle to guide the country’s economy, said Albert Edwards, head strategist at Société Générale.
Edwards said China’s actions were reminiscent of similar policies by Pakistan to put a price floor under its equity market in 2008, when a global financial crisis shook the confidence of investors. The
Karachi SE100 stock index had fallen 40 percent from an all-time high before the floor was set, but as soon as the selling ban was lifted three months later, the market sank another 52 percent.
“Chinese authorities’ credibility began to decline … when they actively began to encourage the equity market bubble with state-controlled media urging individuals to buy and characterizing the stock boom as an affirmation of the government’s policies,” Edwards said in
a July 10 report. “The reality of these things is that you can never control a bubble.”
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