Advertisement
China's economic recovery
EconomyGlobal Economy

China’s stocks, bonds to suffer US$65 billion capital outflow in 2024 amid geopolitical risks, waning investor sentiment

  • Chinese stocks and bonds will see an outflow of US$65 billion in 2024, according to the Institute of International Finance
  • Deteriorating relations with the West, along with de-risking, reshoring and technology embargoes, are set to weigh on capital flows, the US-based association says

Reading Time:2 minutes
Why you can trust SCMP
89
Foreign investors pulled US$3.7 billion from Chinese equities and bonds in November, preliminary data from Institute of International Finance (IIF) showed on Wednesday. Photo: Reuters
Amanda Lee

Elevated geopolitical risk and a change of investor sentiment would hold back foreign investors’ interests in Chinese stocks and bonds next year, according to the Institute of International Finance (IIF).

The US-based association for the global financial services industry estimated in a report on Wednesday that Chinese stocks and bonds would see an outflow of US$65 billion in 2024 from foreign investors.

Chinese bonds, in particular, have seen consistent outflows from foreign investors since the start of the year, IIF data showed.
The wide US dollar- yuan yield spread will likely persist due to the People’s Bank of China’s dovish stance
Institute of International Finance

“We project continued net outflows of non-resident capital from China in 2024. After significant outflows in 2023, net outflows of non-resident portfolio debt are projected to remain substantial at US$45 billion in 2024,” the IIF said in its capital flows report.

“Despite the US Federal Reserve’s halted rate hikes, the wide US dollar- yuan yield spread will likely persist due to the People’s Bank of China’s dovish stance.”

China’s central bank has kept interest rates low in a bid to support credit demand, which has been subdued this year.

Meanwhile, the large interest rate differential between China and the US has exacerbated capital outflows from yuan-denominated assets since the US Federal Reserve began raising its benchmark rate in March last year.

Advertisement