Date
23 March 2017
Traders are seen in action on the floor of the Hong Kong stock exchange, which has witnessed a surge in ETF investors fleeing the market. Photo: Bloomberg
Traders are seen in action on the floor of the Hong Kong stock exchange, which has witnessed a surge in ETF investors fleeing the market. Photo: Bloomberg

Investors flee ETF tracking Hong Kong stocks

Investors in the biggest US exchange-traded fund tracking equities want out of Hong Kong stocks, whether the market rallies or slumps.

In May, they pulled a net US$142 million from the iShares MSCI Hong Kong ETF, which is poised for an 11th straight month of net outflows and the longest string of declines on record, Bloomberg reports.

While the underlying stock index has fallen 2.6 percent this month, investors were net sellers even in March when the gauge staged its biggest rally in four years.

China’s slowdown is affecting everything from trade to retail sales, a dysfunctional political system is delaying bills and spurring calls for independence.

Goldman Sachs Group Inc. is predicting house prices will tumble 20 percent in a city where business is dominated by a handful of property tycoons.

“In the course of last year or so, there’s been little good news and a whole series of worrying,” said Andrew Milligan, the Edinburgh-based head of global strategy at Standard Life, which manages about US$365 billion.

“It’s no surprise that some people have said, I think this story has reached the end and I need to invest elsewhere.”

The US-listed ETF tracks the MSCI Hong Kong Index, which represents largely local companies including Hong Kong Exchanges & Clearing Ltd., developer Sun Hung Kai Properties Ltd. and utility CLP Holdings Ltd.

The gauge tumbled 3.4 percent last week, spurring investors to pull a net US$125 million from the ETF — the second-largest net sales in a year.

Net outflows since the end of June last year have totaled US$1.5 billion, including US$31 million in March when the gauge rallied 9 percent.

Investors are turning to other country ETFs, with developing-nation funds in particular luring capital, says Joshua Crabb, Hong Kong-based head of Asian equities at a unit of Old Mutual Plc.

The iShares MSCI Emerging Markets ETF drew net inflows of US$2.6 billion this year while Vanguard FTSE Emerging Markets ETF is on course for a third straight month of inflows, data compiled by Bloomberg show.

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