Morgan Stanley: Foreign Inflows into China's Stock Market Hit $2.2B in October; Capital Goods, Insurance Sectors Favored

According to Morgan Stanley data, foreign capital inflows into China's stock market slowed to $2.2 billion in October, influenced by geopolitical risks and weaker risk appetite toward year-end. By company, the most significant increases in holdings were seen in CCB (00939) and PING AN (02318), while the largest reductions were in BABA-W (09988) and TENCENT (00700).

The report noted that passive foreign funds injected $3.2 billion into Chinese equities in October, while active funds saw outflows of $1 billion. As of October 31, year-to-date net inflows from foreign long-only funds (including active and passive) reached $8 billion, reversing the $17 billion outflow recorded for the full year of 2024.

Retail participation in A-shares declined in October, and growth in equity-focused mutual fund assets slowed. Meanwhile, passive foreign funds tracking the CSI 300 Index experienced notable outflows.

Among overweight sectors, active fund managers favored capital goods, insurance, and materials the most, while media & entertainment and consumer services saw the largest reductions in overweight positions. In underweight sectors, discretionary consumer distribution and retail saw further underweighting, while technology and healthcare/biotech narrowed their underweight gaps.