According to BNY’s Geoff Yu, despite a bear market in the Hong Kong China Enterprises Index and a 15–16% decline in Chinese equities this year, institutional investors have continued to increase their exposure to Chinese equities [1]. Data from BNY indicates that inflows into Chinese equities have outperformed the rest of Asia, even as sentiment in other markets such as South Korea and Taiwan has been negatively impacted by outflows [1].
Yu notes that although Chinese equities have fallen 15% to 16% year-to-date, resulting in losses on existing holdings that outweigh the value of new purchases, institutional holdings remain elevated compared to historical levels [1]. Specifically, China holdings are currently in the eighth percentile of their 2026 range, but this reflects a modest decline from previously high levels rather than a significant underweight position [1].
The recent selloff has made Chinese equities more attractive to investors, with major China ETFs now down nearly 20% from their year-to-date highs and over 12% below their 200-day moving averages, indicating a deeply oversold market [1]. Valuations are described as relatively undemanding, with the Shanghai Stock Exchange trading at a trailing P/E of 17.6x and the HSCEI at 11.3x [1].
BNY’s analysis suggests that the combination of attractive valuations, resilient export data, and the potential for further policy support is underpinning a buy-the-dip mentality among major investors and supporting continued cross-border inflows into Chinese equities, despite recent market weakness [1].
CONCLUSION
Institutional investors are maintaining or increasing their exposure to Chinese equities, viewing the recent declines as an opportunity rather than a deterrent. Attractive valuations, resilient exports, and the possibility of policy support are key factors supporting this buy-the-dip stance.