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April 2023
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April 2023
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China equity ETFs jump as zero-Covid ends, bond funds reverse course

By Hui Ching-hoo   
March 17, 2023

China’s equity exchange-traded funds attracted US$20 billion of net inflows in the final quarter of 2022, nearly one-third of the $65 billion for the full year, after Beijing dropped its zero-Covid policy, according to Broadridge Financial Solutions Inc.

The money that flowed into the ETFs in the last three months of 2022 accounted for 80% of stock fund net sales for the period, the US financial technology firm says in a report on March 15, noting that market sentiment in China improved after the end of the strict Covid-19 policy.

Beijing abruptly abandoned the policy in December after rare mass protests. This, together with government stimulus such as tax cuts, led to the CSI 300 Index gaining 2% in the fourth quarter.

But bond funds reversed course after six straight quarterly net inflows, with $81 billion of outflows in the last three months of the year. Mixed-asset and multi-asset funds saw a net outflow of $9 billion.

Beijing’s “dramatic policy shift and strong expectations for government measures to support economic growth had a negative impact on China’s bond market”, Broadridge says.

Investors also pulled out a net $65 billion from long-term funds in the three months to December, marking the first quarterly outflow in five years. Bryan Liu, an associate director of Broadridge, attributes the exodus to an “unstable market environment”.