Investors cautious on China markets amid growth concerns, delisting

BEIJING — Investors turned increasingly cautious on Chinese stocks, especially those listed overseas, in the first quarter of the year that was rocked by geopolitical tensions and worries about growth.

That’s according to data from research firm EPFR Global.

While the period ended with more than $20 billion in net inflows to mainland Chinese stocks, the bulk occurred in January, and the pace of buying dropped sharply as the quarter progressed, the data showed.

The first three months of the year saw the U.S. and Europe sanction Russia over its invasion of Ukraine, while China pursued a more neutral position. The quarter also saw growing worries about forced delisting of Chinese stocks from U.S. markets amid a flurry of announcements from both countries’ securities regulators.

“Anything that relates to China we can find in causality and reasoning from either Russia or [the] U.S. right now,” said Steven Shen, manager of quantitative strategies at EPFR. The firm says it tracks fund flows across $52 trillion in assets worldwide.

Chinese stock funds focused on ESG — environmental, social and governance factors — saw inflows until mid-February, when they began seeing outflows instead, Shen said.

In contrast, global ESG stock funds saw “very consistent” inflows over the first three months of the year, he said.

The firm did not share specific reasons for the divergence.

ESG-related concerns drove other investment allocation changes.

Among the headlines of the first quarter, Norges Bank Investment Management — an investment arm of Norway’s central bank which manages the world’s largest sovereign wealth fund — announced it will exclude shares of Chinese sportswear company Li Ning “due to unacceptable risk that the company contributes to serious human rights violations.”

When contacted by CNBC in late March, the fund declined to elaborate further, but noted the Norwegian government asked the fund to freeze investments in Russia and prepare a plan for divesting from the country. The fund had a market value of more than $1.2 trillion as of Monday.

Li Ning did not respond to a CNBC request for comment.

While mainland Chinese stock funds held onto inflows, European stock funds saw billions of dollars in net outflows in the first quarter, according to EPFR.

Japanese stock funds saw declines as well, the data showed. It also showed U.S. stock funds retained strong net inflows, for a total of more than $100 billion in the first quarter.

For Chinese stocks listed in Hong Kong and the U.S., Shen noted a…