China Stocks Fall Amid Rising Capital Outflows and Falling Foreign Direct Investment

Li Chen
24 Jun, 2024
Hong Kong

Market indexes in Shanghai and Hong Kong faced selling pressure in Monday's trading as foreign investors continued to lower their stock holdings amid a poor economic outlook. 

The Hang Seng index declined more than 1% and dropped about 10% from its high in March, and foreign investors sold 33 billion yuan of stocks this month. 

Policymakers have struggled to announce concrete measures to revive consumer confidence and support economic growth as the Chinese government struggles with sky-high debt at the national and local levels, limiting the availability of funds. 

Moreover, corporate earnings have been mixed, indicating that depressed market valuations are likely to persist amid a lack of catalysts in the near term. 

Rising tensions with the West also negatively impacted foreign direct investment flow in the first five months of May. 

Between January and May, 21,764 new foreign-invested enterprises were established nationwide, an increase of 17.4%, and foreign capital used was 412.51 billion yuan, or $56.7 billion, a decline of 28.2% from a year ago. 

However, capital use in high-tech manufacturing was 12.7%, an increase of 2.7 percentage points to 50.4 billion yuan. 

Germany increased its investment by 24.2% and Singapore by 16.2% from a year ago, respectively. 

The Chinese yuan declined to 7.28 against the U.S. dollar amid worries about rising capital outflows as foreign investors lighten their domestic stock holdings. 

 

China Stock Movers 

The CSI 300 index increased 0.2% to 3,503.17, and the Hang Seng index declined 0.8% to 17,892.75. 

Midea Real Estate Group soared 70% to HK$6.38 on a proposal to take the company private. 

Haidilao International declined 4.5% to HK$14.42, and the company named Gou Yiqun as its new chief executive, replacing Yang Lijuan. 

Kweichow Moutai fell as much as 2% before recovering to an increase of 1% to ¥1,483.88 on a news report that prices of its popular liquor declined below 2,100 yuan, or about $290. 

SMIC declined 2.2% to HK$18.20, and Trip.com fell 3.2% to HK$373.60. 

Chinese tourist arrivals in Singapore and Malaysia are likely to surpass pre-pandemic levels in 2019, but arrivals in Thailand and Japan are still lagging.