Key Takeaways
- A major portion of China’s massive $1.2 trillion trade surplus is flowing into the Hong Kong stock market, according to a Caixin analysis
- The recent passing of legendary investor Mark Mobius underscores a reality that an old guard of early China bulls is dying out and not being replaced
image credit: Bamboo Works
We’re currently witnessing a pair of fascinating developments in the Chinese equities space. A recent analysis by Caixin suggests that a significant portion of China’s $1.2 trillion trade surplus is unexpectedly flowing into the Hong Kong stock market. At the same time, the death of celebrity investor Mark Mobius this month highlights a broader trend: the legendary China bulls of the past are fading away, and they aren’t being replaced. These two stories underscore a profound shift in the Chinese market — one driven by surprising internal capital flows, the other by a structural decline in Western investor optimism.
Caixin’s analysis shows that instead of going into China’s forex reserves or domestic infrastructure building, a massive chunk of the country’s export surplus is being funneled directly into Hong Kong equities. This is a fascinating revelation. If hundreds of billions of dollars from China’s export machine — which really is just thousands of individual companies — are flowing into this offshore market, it helps explain the exchange’s prolonged rally and how it’s been able to effortlessly absorb so many fairly large IPOs from Mainland firms.
Inevitably, some of this surplus is being used by companies expanding overseas to build manufacturing plants in Southeast Asia, Europe, and Latin America. Yet, a substantial amount is still hitting the stock market. From a broader macro standpoint, one might wonder what this means for the Chinese …
This post was originally published here
