- Investors have been fleeing from positions in Chinese and European markets over the past month.
- The Institute of International Finance said the scale of outflows from China is “unprecedented.”
- Additionally, investors have pulled out more than $23.4 billion from Western European stock funds.
Over the past month since Russia invaded Ukraine, investors have been fleeing from positions in Chinese and European markets.
New data revealed large portfolio outflows from Chinese equities and bonds, according to a Thursday report from the Institute of International Finance.
“Outflows from China on the scale and intensity we are seeing are unprecedented, especially since we are not seeing similar outflows from the rest of emerging markets,” Robin Brooks, the IIF chief economist, and his colleagues wrote.
“The timing of outflows — which built after Russia’s invasion of Ukraine — suggests foreign investors may be looking at China in a new light, though it is premature to draw any definitive conclusions in this regard.”
Foreign investors reduced their Chinese government bond holdings at a record pace in February. Western sanctions that have frozen Russia’s foreign assets have led to speculation that Moscow may sell Chinese debt to raise funds. Chinese stocks have also fallen recently on fears that the sanctions against Russia could eventually hit its ally.
In Europe, investors have grown increasingly bearish, pulling $23.4 billion from Western European stock funds during the weeks following Russia’s initial move on Ukraine, according to data from EPFR.
The Wall Street Journal noted this is more than double the outflow seen during the first three weeks of the pandemic in early 2020.
Meanwhile, EPFR data revealed investors have put $40.5 billion into US stock funds over recent weeks.
The numbers show that investors aren’t confident in trading or owning overseas assets amid the geopolitical conflict and uncertainty. Economists at Citi pared back their forecasts for global and eurozone GDP expectations, and simultaneously raised inflation forecasts.