We hope you have enjoyed our China Week coverage with extensive analysis on the ongoing malaise in Chinese Real Estate. Positioning in CNY markets is an underreported angle in the discussion on China as it may help guide asset performance from here, now that everyone and their mother agrees that China is stuck in a mess.

Are international investors even involved in China anymore? And is the market maybe even outright short China at this juncture? Let’s look at the (scarce) evidence on Chinese positioning in this weekly Positioning Watch (out every Saturday at 16.00 CET).

Global Equity Investors: Bye bye China, Hello Europe

China positioning is not as easy to gauge as the data available is relatively mediocre compared to Western markets. The good thing about international flows into China is that we can measure them ourselves without having to take CPP controlled statistical bureaus at face value when assessing the information.

International equity flows into China really picked up through 2020/2021 (Admittedly everything saw inflows through Covid), but also to an extent where Chinese equity inflows briefly outpaced European dittos, which is an outlier scenario according to our data sources.

Chinese positioning has since fallen apart and flows have been one way traffic out of the door since early 2022 when it became apparent that China ran a much lengthier and harsher Covid lock-down than peers. Outflows remain present at this juncture for good reasons.

Chart 1: International investors are buying Europe and selling China