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Eyes On Chinese Equities

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  • In the past few weeks, we have seen that the deceleration in 'global liquidity' (annual change in major CB assets) has led to a halt in the momentum on mega-cap growth stocks; FANG+ index has been moving sideways its their peaked reached in mid-February, oscillating between 6,000 and 7,000.
  • Since the start of the year, investors have been arguing that the rise in inflation was going to result in a 'Great Rotation' from tech and growth stocks to value stocks, which have been constantly underperforming in the past cycle.
  • Interestingly, this chart (source: BoA) shows that the 6-week cumulative outflow in tech stocks has been the largest since January 2019 (following strong selloff in Q4 2018).
  • With recent 'hawkish' tone from US policymakers, rising uncertainty, contracting Chinese liquidity and increasing outflows, are tech stocks under pressure in the near to medium term?

Source: BoA