Chinese Outbound Investment Scheme Adds More HK Stocks to Hedge Overseas Volatility

Chinese Outbound Investment Scheme Adds More HK Stocks to Hedge Overseas Volatility

Liao Shumin

Date: Wed, 04/25/2018 - 13:43 / source:Yicai
Chinese Outbound Investment Scheme Adds More HK Stocks to Hedge Overseas Volatility
Chinese Outbound Investment Scheme Adds More HK Stocks to Hedge Overseas Volatility

(Yicai Global) April 25 -- One of China’s outbound investment schemes focused mainly on Hong Kong and US equities in the first quarter, with the former coming further into favor as investors grow more cautious on the back of sharp fluctuations in overseas markets. 

Holdings of Hong Kong stocks by Qualified Domestic Institutional Investor (QDII) funds rose 4 percentage points to 65 percent of the total, accounting for CNY37.7 billion (USD6 billion), the Securities Times reported. The US share fell 2 points to 25 percent, or CNY14.5 billion.

Volatility returned to the US stock market in the first quarter, with both the Dow Jones Industrial Average and the S&P 500 index registering corrections, ending nine quarters of gains. The tech-focused Nasdaq rose for a seventh straight quarter, advancing 2.3 percent. Among other issues, the Facebook data scandal and the China-US trade standoff weighed on markets. Despite volatility in Hong Kong too, the Hang Seng Index climbed for a fifth straight quarter.

It is necessary to closely follow how the China-US trade tussle unfolds, as it could cast shadows over US stock prices in May and June, said Zhang Feng, a fund manager at Fullgoal Fund Management Co.

Many QDII funds are particularly keen on three sectors: finance, information technology (IT), and consumer discretionary goods. Finance is the most popular, with investments in that sector rising to 30.5 percent in the first quarter, up from 26.8 percent at the end of last year. Stakes in IT and consumer goods firms were trimmed. 

Set up in 2006, QDII allows domestic investors to invest in offshore securities and bonds. Some 90 percent of QDII funds were committed to equities in the first three months of this year.

QDII funds were also put into high-tech firms. Some 30 held large shareholdings in Tencent Holdings Ltd. [HK:0700], and increased their appetite for its stock in the first quarter. Major financial stocks like those of Industrial and Commercial Bank of China Ltd. (ICBC) [SHA:601398; HK:1398] were also favored by several QDII funds.

Editors: Emmi Laine, William Clegg

Follow Yicai Global on

Keywords: QDII, Finance, IT Stocks, TENCENT, Chinese Outbound Investment