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Foreign investors have dumped a further Rmb23bn ($3.15bn) of Chinese equities so far this month following record outflows in August, despite tentative signs of an improvement in the world’s second-largest economy.

Selling through China’s Stock Connect schemes, which allow foreign investors to trade onshore equities, has been at a slower pace so far than during the previous month when $12bn worth of stocks were sold through them. Yet Chinese equity markets are still on track for one of their biggest net monthly outflows this year.

China’s CSI 300 index of top stocks has remained flat this week, despite better than expected figures for retail sales and industrial production being reported on Friday last week, and a moderate improvement in the official manufacturing purchasing managers’ index (PMI) released late last month. Hong Kong’s Hang Seng China Enterprises index has shed 2 per cent this week.

“We think the economy has already bottomed, that has been confirmed by data,” said Dong Chen, head of Asia macro research at Pictet Wealth Management. “In terms of the market . . . what we’re seeing is overall sentiment continues to be very downbeat.”

Industrial production rose 4.5 per cent year on year in August. Retail sales, a gauge of spending that had remained consistently weak, added 4.6 per cent. Both measures came in higher than analyst had forecast, and exceeded growth rates reported for them in July of 3.7 and 2.5 per cent, respectively.

The manufacturing sector PMI for August also came in marginally higher than expectations, ticking up to 49.7 from 49.3, edging closer to the 50-point reading that separates expansion from contraction. Separate figures showed that new loan issuance at Chinese banks also rose sharply in August, beating forecasts.

“Usually global investors in previous cycles tend to move earlier,” Chen added, on the lagging response of the stock market to the better numbers.

Several investors said that while economic performance was showing signs of finding a bottom, so-called “peak pessimism” for foreign investors might trail any improvement in economic performance, given the concerns over US-China relations and Beijing’s regulatory crackdown against the private sector in recent years.

Other investors flagged domestic issues, such as slumping house prices and high levels of local government debt, as signalling that economic woes could continue.

With property making up some 70 per cent of household wealth, flagging real estate sales and house prices would impede any consumption-led rebound, said Prashant Bhayani, Asia chief investment officer at BNP Paribas Wealth Management.

“Without property bottoming, people don’t feel comfortable spending, because it’s the biggest proportion of their wealth,” he said.

He added that, while hopes for a “bazooka” stimulus following China’s politburo meeting in July had been dashed, the government would need to continue to unveil “incremental measures” to support equities, such as more efforts to boost the property market and incentives to increase consumption.

“It feels like we’re bumping on the bottom, the question is what’s the upside?” Bhayani said.

Despite months of poor economic performance this year and a string of property developers missing payments on international bonds, Beijing has so far limited property support to measures such as lowering payment requirements and mortgage rates.

It has also unveiled measures to support stock markets directly, cutting a levy on share trading for the first time since the 2008 financial crisis and allowing for greater leverage in equity trading.

Sunil Tirumalai, Mumbai-based executive director for GEM equity strategy at UBS, said investors were waiting for sustained policy support from Beijing after a post-Covid rebound fizzled out.

“Any way you cut it, Chinese equities are cheap,” he said. “I think the market is taking it very sceptically: let’s see more stuff on the ground that gives us confidence before we start buying.”

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