In 2023, long-only funds recorded their largest monthly China equity sell-off in December, according to Morgan Stanley analysts, driven by redemption requests as well as portfolio diversification.
China and Hong Kong equities posted a total net outflow of $3.8 billion in December last year from global long-only funds, according to a report by Morgan Stanley’s quantitative research team. This was the largest monthly sell-off in 2023 and the third largest monthly sell-off on record.
$2 billion was attributable to investor redemptions. The remaining was driven by fund managers rebalancing to other markets, including European fund managers who were «catching up [with US peers] to align their underweight on China», said the report authored by analysts led by Gilbert Wong.
Top Holdings
In terms of changes in weightings, Tencent Holdings, Alibaba Group Holdings, Kweichow Moutai and Netease were the most bought while JD.com, Yum China Holdings and AIA were the most sold.
Last year, China and Hong Kong equities were amongst the worst performers worldwide. China’s CSI 300 Index and Hong Kong’s Hang Seng Index fell 11 percent and 14 percent, respectively, in 2023.
