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Global Funds End Four-Year Underweight Stance on China, Drawn by AI and Valuations
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CNBC TV18•28-09-2026, 09:21
Global Funds End Four-Year Underweight Stance on China, Drawn by AI and Valuations
- •Global fund managers have shifted to a "benchmark-neutral" weighting on Chinese stocks, ending a four-year period of being "underweight," according to Bank of America analysis of nearly 2,800 funds.
- •The change is driven by attractive valuations and improving profit outlooks in growth sectors like artificial intelligence, with funds collectively managing $562 billion in Chinese stocks.
- •This shift suggests that managers are largely done reducing their exposure, removing a significant hurdle for the market's recovery, rather than signaling an outright bullish turn.
- •China and Hong Kong-focused ETFs saw $19 million in inflows in August, contrasting with $1.94 billion in outflows in July, indicating a potential floor for allocation reductions.
- •While the MSCI China Index trades below its 10-year average valuation, recovery remains uneven, with tech hardware and new-economy companies showing strong earnings, while property and consumer industries lag.
Key Questions Answered
Global fund managers are reducing their long-running retreat from Chinese stocks, drawn by artificial intelligence prospects, attractive valuations, and improving profit outlooks in growth sectors.
Active long-only funds moved to a benchmark-neutral weighting on China, ending a four-year run of being underweight.
Investors are focusing on hardware technology and biopharmaceuticals as preferred sectors, while consumer industries and real estate are viewed as the past of China.
