Foreign flows into Chinese equities have reached 'spectacular' levels, said Cameron Brandt of EPFR Global, with China dedicated funds getting a net inflow of $13 billion for the week, as compared to dedicated India funds' $107 million worth of net allocation.
In conversation with CNBC-TV18, Cameron Brandt said the average weekly inflow into India dedicated funds since the past year had been in the range $400-500 million. This week's inflow implies a sharp drop in the category, as compared to the one-year average.
Read More: China, Hong Kong soared $3 trillion in two weeks
"Inflows into India dedicated funds this week have been less than 1% of what we saw in dedicated China fund."
Even though China remains the 'only game in town', Brandt added that India's inflows still remain in a 'healthy position', as most of the money is coming at the expense of Europe. "This is not such a straightforward India-China rotation, as it might first appear," said Cameron Brandt. This week, he said most of the inflow into these category of funds has come from Chinese domestic investors who have been 'rotating money back into equities' from other assets.
Read More: Adrian Mowat sees some outflow as fund sell to money to China
Money is still coming into India on a net flow basis, Brandt added. "These inflows into dedicated India funds have continued for well over a year, and the money is still coming, even when a more alluring alternative is being offered."
China's stimulus has triggered a buying spree in local equities since last week, and market participants are now assessing how sustainable is the pace of rise what has been fastest since November 2008.
Some selling in other stock markets to fund this rotation trade partly explains the selloff in ex-China emerging markets this week.
Brandt foresees the China rally to continue for a while. "China has made it clear that they are want the stock market to rise, and it is likely to continue for a while."
| Indices | One Week Return So Far |
| Hang Seng | +10.76% |
| Nifty 50 | -3.6% |
| CAC 40 | -3.4% |
| FTSE 100 | -0.5% |
| DAX | -2.3% |
| Dow Jones | -0.5% |
Shanghai Composite only traded on Monday this week, ending higher by over 8%.
Read More: GQG Partners' Rajiv Jain unimpressed by the China rally
There have been some voices of caution as well, in this week's frenzied buying. A Nomura note has warned that 'a stock market mania would be followed by a crash, similar to what happened in 2015', in the most gloomy scenario.
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