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BofA Says State Funds Drive Biggest-Ever China Stock Inflows

(Bloomberg) -- Funds tracking the topsy-turvy Chinese stock market just recorded their biggest-ever weekly inflows, according to Bank of America Corp. strategists.

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A record $19.8 billion poured into funds focused on Chinese stocks in the week through Feb. 7, a splurge likely driven by state-backed investors, a BofA team led by Michael Hartnett wrote in a note Friday. That accounted for almost all of the $20.8 billion — an all-time-high — that flooded into emerging-market equities, the strategists said, citing EPFR Global data.

The past week saw onshore Chinese equities rebound sharply as investors bet on more forceful government actions to stem a prolonged stock rout. The CSI 300 Index posted its best week since 2022, bouncing off the five-year low touched on Feb. 2.

By contrast, gains in the MSCI China Index — which is more heavily weighted toward Chinese firms listed in Hong Kong and the US — have been more tepid. Investors have said this divergence is in part driven by state purchase of onshore stocks, signaled by a jump in volumes in some exchange-traded products tracking blue-chip indexes. Earlier this week, for example, sovereign fund Central Huijin Investment Ltd. vowed to buy more A-share stocks.

Goldman Sachs Group Inc. strategists have estimated that state purchases of onshore Chinese stocks amounted to 70 billion yuan ($9.7 billion) last month.

Read more: China Stock Rebound Shows Cracks, Spoiling Traders’ Holiday Mood

The recovery in Chinese stocks showed signs of losing steam on Friday, with the MSCI China Index declining for a third day ahead of the Lunar New Year holidays. The Hang Seng Index fell 1% in a shortened session. Mainland markets were closed Friday and will stay shut through next week.

--With assistance from Michael Msika.

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©2024 Bloomberg L.P.

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