Capital flows back to US-listed China ETFs post big sell-off

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By Summer Zhen

HONG KONG (Reuters) -Major U.S.-listed exchange-traded funds (ETFs) that track Chinese stocks recorded inflows in May as a U.S.-China tariff truce boosted sentiment, following a heavy sell-off in the previous month.

BY THE NUMBERS

Global investors bought a combined $401.7 million in four major U.S.-listed China ETFs – iShares MSCI China ETF, iShares China Large-Cap ETF, KraneShares CSI China Internet ETF and Xtrackers Harvest CSI 300 China A-Shares ETF this month through May 15.

That compared with a $3.8 billion outflow in April, data from LSEG Lipper showed.

April marked the second largest outflow on Lipper’s record, second only to a $4.4 billion outflow in November 2024.

U.S. institutional investors currently own about $250 billion in U.S.-listed Chinese stocks, according to Goldman Sachs.

WHY IT’S IMPORTANT

Analysts are closely watching flows into Chinese shares traded in U.S. markets to gauge the extent of investor concern over the potential removal of Chinese companies from U.S stock exchanges – a delisting that could heighten the financial decoupling between the two biggest economies.

Those concerns were at the fore in April when U.S. President Donald Trump dramatically escalated his trade war with China by raising tariffs on Chinese imports to 145%, while U.S. Treasury Secretary Scott Bessent hinted the possible delisting of Chinese stocks from U.S. bourses might figure in trade talks.

KEY QUOTES

“The selling pressure in April was mainly due to trade tensions … we have seen some sentiment recovery in May,” said Jason Lui, head of APAC equity and derivative strategy at BNP Paribas.

“The majority of outflows in April came from hedge fund and arbitrage strategy players. We see most institutions stay invested in our fund,” said Xiaolin Chen, head of international at KraneShares, which manages the $7 billion KWEB.

(Reporting by Summer Zhen; editing by David Evans)