In a note to clients Thursday, analysts at UBS questioned whether investor positioning on China is the most extreme in recent memory.
The bank said its tracking of the top 40 global funds (including both passive and active holdings) shows that their total equity holding in China is at the lowest level in the last ten years, on par with levels last seen in 2014.
"Looking at positioning of active foreign institutional funds, these have further reduced their China positions in 4Q23 with their average underweight positions at -2.9ppt vs -2.7ppt in 3Q23 and -2.4ppts in 3Q22," said UBS.
The firm added that emerging market funds saw the most sell-down in the quarter and are now, on average, 6.6ppts underweight in China, while global mandated funds also saw some sell-down and are now 1.8ppts underweight.
"The sectors that saw the most active foreign outflows in 4Q23 included online gaming, leisure, express delivery and solar while biotech, restaurant and education received the most inflows," they added. "A-share continued to see more foreign selling vs other markets with northbound outflows at US$8.3bn while foreign holding modestly increased in H-share, most likely due to ADR conversion."
UBS also noted that 30 more active funds sold all of their Chinese equity positions in the fourth quarter.