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Rising geopolitical risks and changing investor sentiment will curb foreign investor interest in Chinese stocks and bonds next year, according to Institute of International Finance (IIF).
The U.S.-based organization for the global financial industry said in a report on Wednesday that China’s stocks and bonds will see an inflow of US$ 65 billion in 2024 from investors from outside.
The US dollar-yuan bond yield range is likely to continue due to the People’s Bank of China’s dovish stance
“We predict the continuation of foreign income from China in 2024. After the large outflow in 2023, the debt of non-residents will remain at US$ 45 billion in 2024,” the IIF said in its capital statement. report.
China’s central bank is keeping interest rates low in a bid to support debt, which has been shrinking this year.
Meanwhile, the large interest rate differential between China and the US has increased the outflow of yuan-denominated assets since the US Federal Reserve began raising its rate in March last year.
Trends: what to expect from China’s economy in 2024
Trends: what to expect from China’s economy in 2024
The yuan has lost about 6.2 percent against the US dollar since the beginning of the year, weakening past 7.3 in September and back in October.
The weight of the yuan has begun to decrease, and has fluctuated between 7.13 and 7.17 per US dollar in recent weeks.
In November, foreign investors pulled US$3.7 billion from Chinese funds and bonds, despite a recovery in capital flows to emerging markets, preliminary data from the IIF showed. on Wednesday.
China’s sales had a low share of US $ 600 million, IIF data showed.
“We estimate that the market capitalization attracted US$ 43.4 billion in November 2023,” said the IIF.
“This good result breaks the three-month flow from abroad on the growing market.
“The overall performance is explained by the great value that is in the emerging markets, excluding China.”
According to the IIF, earnings from emerging markets will remain closely linked to the US economy next year.
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For China’s assets, the deterioration of Beijing’s relations with the West remains a risk factor, due to concerns about the damage, repair and technology embargo that will continue next year, which will be heavy in capital, the IIF said.
“Flows to non-Chinese markets should benefit from the global economic slowdown, as economic central banks become less hawkish,” the IIF said.
“However, flows to China will continue to be constrained by heightened geopolitical risk and changing investor sentiment.”