The recent large inflows into China equity funds have been domestically driven, according to analysts at Citi in a research note Wednesday.
Analysts told clients that the investment bank's latest fund flow report showed large inflows to China equity funds, with this week's equity markets positioning showing a turn to bullish repositioning in China futures.
Citi recently reported a weekly inflow to China equity funds of $12.6 billion, representing the largest ETF inflow since 2015. Analysts said this may have led ETF trading to be around 10% of the daily turnover of CSI 300 stocks for a couple of days.
"Drilling down into the fund flow data, recent flows have been entirely driven by Chinese investors into domestic ETFs while 'international' ETFs continue to have outflows and the futures net positioning remains the most bearish across markets," wrote analysts.
"Rather than seeing the large inflows as a potential change in general investor sentiment on China, we see this as a domestic market anomaly, perhaps state-directed through purchases by units of the sovereign wealth funds," they explained.