China ETFs See Major Outflows

Carolina, what is behind this, I guess urge to sell in China? So the funds that we're talking here about here are ETF's that are listed in and trading in China. And so as Katie mentioned, that category has seen about $4 billion worth of outflows in May. That was the first month of outflows in 15. Also to give you an idea of the magnitude here, that's more money coming out that then went into the strategies in the two months prior. So a very strong sort of knee jerk snapback reversal there and that's happening because traders here are really doubting the strength of the recent market rally. You know, we've seen Chinese stocks have this massive rally since they hit that February bottom, and that was really sort of bringing in a lot of traders back into that category. And now we're seeing them pull out mostly because sort of the expectation that there was going to be this policy support in China for the property sector starting to deflate a bit. And we also saw a pretty disappointing earnings season across emerging market companies. And China was no exception to that. Well, it's really interesting because like you mentioned, I mean, we're talking about Chinese ETFs here, but if you take a look at US listed China ETFs. It's a different story. It's such an interesting bifurcation, right, because we just mentioned big outflows out of the China listed products. When we look at the US listed ETF's, I really see some very bullish positioning there. We're looking at a ticker like M Chai, which is a China stock specific ETF listed in the US. After months of outflows, that fund in May saw very strong inflows. EMXC, the ever popular EMX China VET that sort of took the investor world by storm. In the past 18 months after these non-stop inflows, it's seen radio silence of no new cash has come in since like May 8th. Into that strategy, which to me really signals, at least for the US traders, some bullish positioning. And I think that bifurcation here comes in because for US traders, Chinese stocks were so severely under owned for so long that they really started to come back on the back of this rally. They're starting to add a little meat and position there. And also I think they're a little less sensitive and maybe on the mark for some of the headline news which the locals in mainland China, which we see with the China listed strategies maybe are a little more sensitive to. So when we talk about the outflows out of those China ETFs are we talking about? Individual investors or are we talking about fast money professional investors? Yeah. So it's I think it'll depend on the product. It also is going to depend on this timeline. So when we see such a sharp reversal here, we see these very strong outflows out of after inflows. I think that is more indicative of fast money trading. So these are traders that are looking to capitalize on a short term move on a headline. Maybe on a specific technical level, the true sea change of sentiment coming from retail investors, I think we're going to see when we see some money come out of other single country products like if we saw outflows out of India ETFs which we haven't seen. And inflows into China, that's more indicative of a sea change move.