SHANGHAI: Chinese investors are piling into foreign assets, especially US stock funds, after regulators lifted outbound quotas, unlocking pent-up demand as domestic yields are at rock bottom and Beijing tightens unofficial routes for moving money abroad.
While China has cracked down on what it deems illegal overseas investing through online brokerages, it has simultaneously broadened authorised channels to foreign markets.
Late last month China’s foreign exchange regulator raised the outstanding Qualified Domestic Institutional Investor quota by US$6.8 billion (RM28 billion) to a record US$183 billion. The speed with which US-focused funds moved to curb inflows just days later underscores investors’ scramble for exposure to Wall Street.
The daily inflow cap on a QDII fund tracking the Nasdaq 100 was raised from 10 yuan to 5,000 yuan on Sept 9. Just a day later, its fund manager Wanjia Asset Management sharply limited inflows again to 100 yuan daily for an individual investor.
“It means there was explosive inflows so the fund manager needed to limit the subscriptions,” said Ivan Shi, head of research at fund consultancy Z-Ben Advisors. “There remains huge appetite in China for US tech stocks.”
The rush overseas highlights Beijing’s growing challenge in stemming capital outflows. Confidence in the domestic economy remains fragile, China’s 10-year government bond yield sits more than three percentage points below US Treasury yields, and the local stock market has broadly lagged the double-digit gains delivered by US equities this year.
Portfolio investment hit a record US$426 billion deficit in 2025, according to China’s Balance of Payments data, and net outflows reached US$146 billion in the first quarter of this year.
In another case, China Universal Asset Management eased restrictions on its Nasdaq 100 ETF, only to tighten curbs again two days later. TruValue Asset Management took a similar U-turn on its QDII fund investing in global chip stocks.
“Chinese demand for global asset allocation is getting bigger and bigger,” said Xu Jie, fund manager at Yuanzi Investment Management, which invests in global markets through exchange-traded funds (ETFs) under QDII.
Long-term investors need to “diversify risks and share growth in major global markets.”
The US is the top destination for QDII funds, accounting for nearly half of the roughly 1 trillion yuan (RM608 billion) business, according to Shanghai Securities.
Most US-bound ETFs trade at a hefty premium to their net asset value, reflecting investors’ eagerness to secure limited overseas exposure. A Shenzhen-listed ETF tracking the Nasdaq-100 Technology Sector Index traded at a premium of 24% yesterday.
“The premium just reflects strong household demand on global assets,” said Zhaopeng Xing, senior China strategist at ANZ.
China’s balance of payments turned positive recently due to strong trade inflows, “but the regulators still need a balance to control outflows,” he said. – Reuters
