Foreign fund outflows accelerated, A-share national team sales remained high, and southbound funds rebounded sharply (Morgan Stanley)
The monthly tracking report on capital flows and positions in Hong Kong stocks released by Morgan Stanley shows that the outflow of foreign funds has accelerated, with both passive and active funds showing net outflows.
The monthly tracking report on capital flows and positions in Hong Kong stocks released by Morgan Stanley shows that the outflow of foreign funds has accelerated, with both passive and active funds showing net outflows. The cumulative foreign capital inflow in the first half of the year was only 50% of that for the whole of 2025. National team selling in the A-share market remains high, but domestic liquidity remains resilient, financing balances hit a record high, private equity fund management scale continues to expand, southbound funds rebound sharply, while foreign passive funds turn to outflows for A-shares. The market may have underestimated the persistence of foreign capital outflows and the supporting role of domestic liquidity (southbound funds). One-sentence conclusion: China's stock market capital situation shows a pattern of foreign capital outflows and domestic liquidity supporting the bottom. The pressure of foreign capital outflows is still there, but southbound capital and domestic liquidity provide support, and the market downside risk is limited. Good/bad: Good for the Hong Kong stock market, especially the technology, Internet, and consumer sectors that are favored by southbound funds. It is negative for A-share blue chips with a high proportion of foreign holdings. The market has a certain understanding of the differentiation of capital, but the resilience of domestic liquidity and the persistence of foreign capital outflows may be underpriced. Catalysts: 1) changes in the speed of net foreign capital outflows; 2) persistence of southbound capital inflows; 3) changes in A-share financing balances and private equity fund positions.