Despite Wall Street's repeated bullish outlook, CICC disclosed: foreign capital has flowed out of Hong Kong stocks after the holiday, the inflow from the south has slowed down, and there has been selling of Xiaomi and SMIC

Recently, Wall Street institutions have frequently issued positive signals regarding the Chinese market.

Bank of America strategist Michael Hartnett's team pointed out that the advantages of the U.S. stock market will gradually weaken starting in early 2025, suggesting investors go long on the Chinese stock market.

Market data also shows that investor interest in Chinese assets is rising—KraneShares' China Internet ETF (KWEB) netted $287 million in the most recent trading day, with assets growing by 4.8% to $6.26 billion, reaching a new high since November 13.

However, the latest report from China International Capital Corporation (CICC) released on February 8, titled "Capital Flows: Post-Festival Foreign Capital Trends," presents a picture of active foreign capital continuing to flow out, with southbound inflows narrowing. Specifically:

As of this Wednesday (January 30 to February 5), active foreign capital continued to flow out of China by $290 million (vs. $280 million outflow last week), with outflows from A-shares narrowing to $60 million (vs. $110 million outflow last week), and accelerating outflows from overseas Chinese stocks by $230 million (vs. $180 million outflow last week).

Passive foreign capital inflows narrowed from $580 million last week to $370 million this week, similarly accelerating inflows into A-shares but slowing inflows into overseas Chinese stocks.

CICC analysis suggests that the current inflow of funds may not be driven by long-term active foreign capital, but rather by trading and passive funds.

Regarding the Stock Connect and southbound funds, CICC wrote:

Stock Connect Funds: Northbound funds have stopped disclosing net buying amounts since August 16, 2024, with this week's average daily trading volume better than last Monday. From Wednesday to Friday, the Stock Connect opened, with only January 27 last week opening the Shanghai-Hong Kong Stock Connect, where northbound trading amounted to 166.3 billion yuan, less than this week's average daily trading volume of 203.6 billion yuan. In terms of individual stocks, BYD, CATL, Kweichow Moutai, Kingsoft Office, and Foxconn Industrial Internet had the largest trading volumes.

Southbound inflows have slowed, with the mainland banking sector receiving the most inflows. This week, southbound funds inflowed 4.83 billion HKD, with an average daily inflow of 1.61 billion HKD, narrowing from last week's 9.08 billion HKD. By industry, the mainland banking and consumer sectors received the most southbound fund inflows this week. In terms of individual stocks, southbound funds favored Industrial and Commercial Bank of China and Ascentage Pharma this week, but sold Xiaomi Corporation and SMIC.

This article mainly references: "CICC | Capital Flows: Post-Festival Foreign Capital Trends," Analysts: Liu Gang, Wang Muyao, etc