(Bloomberg) — A record amount of Chinese money is flowing into overseas equities as despondent investors seek a way out of the sagging local stock market.
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Inflows into 33 onshore exchange-traded funds that track foreign benchmarks excluding Hong Kong reached $2 billion in January. That’s the biggest monthly tally in Bloomberg data going back to late 2020. More than half of that poured into US stocks as the S&P 500 hit fresh highs, while another $204 million flocked to Japan.
Such fervor has created huge distortions in the domestic ETF market. Prices have in some cases jumped 40% above the value of the underlying assets, with extreme volatility and frequent trading halts. Despite the risks, investors are undeterred. Due to China’s capital controls, these products are heavily sought after as the most viable channel for retail money to tap overseas markets while local stocks extend their losing…
