Investors snap up China funds – but optimism may be short lived

Written by Emma Wall, Head of Investment Analysis & Research at Hargreaves Lansdown

China’s zero COVID policy has resulted in the country pursuing regional lockdowns long after the West opened up. Last month, it seemed as if President Xi and his party would relax their stance, and market sentiment improved.

HL investors snapped up China funds – with three country focused funds and an Asia fund featuring in the top 20 most bought for June.

Chinese equity investment trusts were also among the most bought last month. But this optimism may prove to be short-lived as this week news that a new variant threatens new-found freedoms.

China shares fell today as authorities announced testing for more than six million people in Guangzhou and Shanghai. Shanghai has only recently emerged from a two-month lockdown which impacted both the stock market and economic growth. Despite the uncertainty, Asia remains more in favour among UK investors than the domestic market, where political upheaval and raging inflation dominate sentiment.

The only region more unpopular with HL clients is Europe, where central bank policy has been slow to react to rising prices, leaving the European Central Bank with fewer levers to pull should the much-anticipated recession materialise next year.

Investor confidence index

The investor confidence index is compiled by surveying HL clients on a monthly basis. Each month we send the investors’ confidence survey to 6,000 random clients and there is a representative split of our clients by age. On average around 10% of clients respond.

Data from HL’s platform: