Foreign investors returning to China should be sympathised with, said Samir Arora, as they are simply suffering from Stockholm Syndrome as part of which captives feel a kinship to their captors or kidnappers
The founder and fund manager at Helios Capital was speaking at Samvat 2079 Roundtable, a panel discussion organised by Moneycontrol and anchored by N Mahalakshmi.
Foreign investors who had fled China in 2021 are returning in droves in 2022. While their investment had fallen by a half in 2021 from a year ago, their investment in 2022 has already exceeded that in 2020. In fact, their investment in China has been the highest in nearly a decade. Their next favourite destination has been Brazil.
But this is just investors finding it difficult to walk away from a bad bet, according to Arora.
“When people say they're putting money in China, let's be sympathetic with them and send them to the psychologist because it's just a case of Stockholm Syndrome,” he said.
“These guys (the investors) have been stuck and over-bullish and carrying the flag (for China) and they've made zero money for 10-20 years. So they are not able to walk away. But slowly some of them who are smarter will walk away or at least reduce,” Arora added.
He was talking about the flight of foreign institutional investor (FII) money from India. FIIs have sold Rs 1.79 trillion (lakh crore) so far this year.
He said that we need to look at the bigger picture to better understand the redemption that has happened this year. “For 20-25 years, FII flows have been positive for. How (else) did we get to this $600 billion? Broadly, every year, we may have got $20-30 billion… they've (FIIs) been putting in (money into India) forever. Therefore, suddenly, it's not going to stop because (only because) they have redeemed this year,” he said.
“By the way, they've sold $45 billion from Taiwan and more than $30 billion from Korea this year,” Arora added.
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