Investors pile into cash, but snap up Chinese stocks in tricky markets

According to BofA Global Research, investors returned to cash and gold in the week to Wednesday due to economic and banking sector uncertainty.

On Friday, BofA noted that EPFR data showed a surge into perceived risky assets like tech stocks and the greatest inflows into Chinese shares in over a year, indicating that the present trading environment is difficult.

After a week of outflows, cash funds received $52.3 billion and gold $200 million.

The year-to-date cash inflows are $634 billion compared to $11 billion for 2022.

In the week to Wednesday, Chinese equities funds received $6.1 billion and tech funds $1.2 billion, the biggest since January and November 2022, respectively.

“Under the surface it’s starting to get scary, but we all know what the Big Tech horsemen can do to P&L before we blow up,” BofA added.

Despite U.S. banking sector jitters, Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O), and Meta Platforms Inc (META.O) reported better-than-expected earnings this week.

As global tensions calmed and markets returned from last week’s falls as data showed an uneven economic recovery, Chinese stocks rose this week ahead of an expected record-high travel rush over the Labour Day vacation.

BofA also noted that for the first time since 1981, every U.S. yield curve has been inverted for over six months, signaling a recession.

It also noted the current 170 basis point spread between the U.S. 3-month and 10-year yield had been exceeded on just 125 days in the preceding 100 years. ,