Rich Chinese Individuals Reportedly Cut Down Domestic Holdings, Look At US Markets To Manage Risks At Home

Wealthy Chinese individuals are reportedly cutting down their holdings of local securities and are increasingly considering assets in the U.S. and elsewhere overseas to mitigate future risks after the rout in domestic financial markets caused by harsh zero-COVID measures.

What Happened: This pattern is set to gather momentum in 2023, reported Reuters citing fund managers and industry sources.

Given the dim return prospects at home, hedge funds with Greater China strategies have shed 12.9% for the year to end-November and are on track for their worst year since 2011, the report said citing Eurekahedge data.

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Rich Chinese are also worrying about Xi Jinping's "common prosperity" drive to reduce income inequality, asset managers said.

In a year that was marred by negative returns in assets across the spectrum, Chinese equities, too, were not spared. Domestic equities witnessed an added burden in the form of zero-COVID policies that saw extended lockdowns across China.

For example, Hong Kong-listed stocks like Alibaba Group Holding Ltd BABA lost over 24% since the beginning of the year, while Nio Inc NIO lost over 43% in the same period.

In the same period, the SPDR S&P 500 ETF Trust SPY lost over 19% while the Vanguard Total Bond Market Index Fund ETF BND shed over 12%.

Expert Take: Jason Hsu, founder and chairman of Rayliant Global Advisors, told Reuters, “Previously, the wealth creation for these people was not (about) buying American stocks, or buying American real estate...it is starting to change." 

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