The relentless dumb bid.
By Wolf Richter of WOLF STREET
The Chinese move, ranging from individual investors to corporate entities, into overseas real estate, particularly in West Coast cities in the US, in Vancouver and Toronto in Canada, but also in trophy cities in Australia, New Zealand, and some other countries, has become legendary.
More recently, Chinese companies, supported by state-owned banks and PE firms, have pushed into global M&A on a large scale, including in the US, buying companies lock, stock, and barrel.
But at the same time they’ve been dumping US stocks and bonds.
They’re following the Chinese government, which unloaded $510 billion of foreign exchange reserves in 2015, including $292 billion in US Treasuries, the first ever annual net sell-down, after having religiously piled them up year after year. China still holds about $1.4 trillion in US government debt. So it has a lot left to sell.
That can no longer be said for Chinese holdings of US stocks. From 2008 through the first quarter of 2015, China bought $117 billion of US stocks, riding the big Fed-induced bull market to its peak. Q1 of 2015 was particularly strong, with $20 billion in share purchases.
But in Q2, Chinese investors dumped a net of $14 billion of US stocks; in Q3 $34 billion; and in Q4 they threw another $68 billion out the door, according to a note by Goldman Sachs, reported by MarketWatch. In total, they sold $116 billion in shares over the last three quarters of 2015!
Is this why the market peaked in May 2015? Because by that time, Chinese investors had switched from buying to selling?
From all the stocks they’d accumulated since 2008, a total of $117 billion, they’re now down to their last $1 billion. Of all the purchases since 2006, they only have $25 billion in US equities left. To top it off, they also sold $130 billion of US corporate bonds last year.
Not exactly a vote of confidence in US stocks and bonds, especially since the Chinese are moving so much money into the US to buy real estate and entire companies…
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