Last week, foreign fund managers have been swiftly withdrawing funds from China’s Exchange-Traded Funds (ETFs), indicating a four-week trend of market impatience. On one hand, news of Trump’s victory has heightened concerns over possible tariffs on exports to China. On the other hand, Beijing’s stimulus measures have failed to convince investors that China can weather the upcoming storm.
According to Bloomberg’s report on Monday (November 11), a $9.5 billion large-cap China ETF saw outflows of $315 million last week, marking the fourth consecutive week of withdrawals since a significant inflow in early October. Additionally, MSCI China ETF recorded outflows of $280 million during the same period.
Roxanna Islam, industry research director at TMX VettaFi, told Bloomberg, “As Trump has been committed to reducing reliance on China and promoting American manufacturing, Chinese ETFs have taken a significant hit.” She added, “After Trump’s victory, investors have shown strong confidence in the U.S. stock market, leading to many international funds withdrawing from China due to potential trade policy changes and tariffs.”
Investors are optimistic about Trump taking office, initiating tax cuts and regulatory relaxations, which to some extent have suppressed interest in risky assets. Furthermore, disappointment over Beijing’s latest stimulus plan is also a key reason. The latest plan aims to ease the debt burden on local governments but falls short of providing the comprehensive financial support that many investors were hoping for.
Islam mentioned that investors were initially waiting for Beijing to introduce a stimulus plan that could address the continuously rising debt levels. Now, with Beijing lacking broader stimulus plans and the Trump administration coming into power, investors are feeling even more disappointed.
There doesn’t seem to be much improvement in China’s ETFs this week either. After the release of the latest economic data over the weekend in Beijing, UBS lowered its forecast for China’s 2025 economic growth, stating that Chinese economy will grow by “around 4%” in 2025 and the growth rate will significantly slow down in 2026.
The bank added that the incoming Trump administration is expected to begin imposing additional tariffs on most Chinese imports starting from the second half of next year in a “phase-in” manner.
This is UBS’s second downward revision this year related to growth targets associated with the Chinese economy.
Malcolm Dorson, senior portfolio manager at Global X Management, told Bloomberg, “What Beijing has given us is more like band-aids rather than a cure. Overall, there may be more meetings and stimulus measures in the future, but the market is running out of patience.”