Capital Flight From China Has New Destination, Institutions Become Day Traders

China's capital flight took a new turn in July with the BigTech crackdown sending money to heaven. The assault on U.S. listed Chinese companies finally turned back on China and shaved trillions off teh A-share market valuation. Retail and institutional investors are daytrading now as they are unsure of what the immediate future holds.

iFeng: 风暴眼｜机构彻底“韭化” A股直上直下震惊资本大佬 官媒：以改革应对挑战 (A-shares go straight up and down, shocking capital tycoons official media: reform challenges)

Core Aspects:

1. After experiencing an "avalanche" plunge in China's concept stocks last Friday, A-shares also plunged in the first few days of this week. On the two trading days of July 26 and 27, A-shares lost more than 4 trillion yuan. Northbound funds flowed out nearly 17 billion yuan in two days, and more than 3,000 stocks fell by their limit.

2. Behind the dramatic volatility of the stock market is that institutions and large funds have gradually become "retail accounts" and "leeks". Institutions have begun to follow suit, and large funds have frequently flown in and out.

3. Hu Xiaohui, chief investment officer of the Federal Reserve Securities, told Phoenix.com "Eye of the Storm": "The intuitive reason for this round of decline is due to the plummet of education-related listed companies, but the core logic is not only this. It should be seen that the release of consumption, The combination of factors such as domestic economic growth, central bank monetary policy, unfriendly international environment, and high market valuations has become the driving force for the merger."

4. On the evening of July 28, in response to the recent fluctuations in the capital market, Xinhua News Agency published an article stating that the fundamentals of China’s economic continued improvement have not changed, the foundation for the development of China’s capital market remains solid, and industry regulatory policies are conducive to China’s long-term development. . Responding to challenges through reforms is the meaning of the question.

The violent market volatility has also caused many private equity, public offerings and investors to ask questions: Do A-share companies need to be revalued? Has the logic of the capital market changed?

On the evening of July 28, an article by Xinhua News Agency answered the recent volatility in the Chinese stock market and the worries that existed in the market.

Xinhua News Agency believes that the fundamentals of China's continued improvement of the economy have not changed, the foundation for the development of China's capital market remains solid, and industry regulatory policies are conducive to China's long-term development.

The latter is the same bullshit all politicians and bureaucrats the world over say when things are going poorly. Financial markets respond to fundamentals in the very long-term, but in the short-term they are psychological. The CCP just nuked two of its most impressive industries that attracted foreign capital. Chinese investors are wondering what industry will be targeted next? Investors in the U.S. and elsewhere should pay close attention because this is what the public is baying for: anti-trust action against BigTech companies and corporations.

Taking a step back, perhaps this isn't a big news item for China in the long-term. The policy isn't a total shock for long-term China watchers. That opens the door to a bigger issue looming in the background: a Chinese and global economy that is in fact not on sound footing and perhaps vulnerable to a major shock. Worth remembering that it was the month of August in 2015 when China shocked global markets with the sudden depreciation of the yuan.