Foreign outflows accelerated in June, while domestic liquidity remained supportive

Overview

The report tracks China/HK equity fund flows in June 2026, A-share market liquidity, southbound/northbound proxy indicators, and changes in active fund holdings. The core conclusion is that foreign outflows accelerated notably, especially as foreign passive funds shifted from inflows to outflows; meanwhile, domestic liquidity indicators still showed resilience, including record-high margin financing balances, continued growth in private and hybrid fund AUM, and a clear rebound in southbound flows in June.

Core views

First, outflows from foreign-domiciled funds investing in China/HK equities accelerated to US$3.6bn in June, with both active and passive money in outflow. Second, global EM funds' underweight to China/HK equities was broadly stable, while the underweight among EM funds and AxJ funds narrowed. Third, domestic A-share liquidity did not deteriorate in step with foreign outflows, as margin balances, private fund AUM, and active mutual fund AUM continued to provide support. Fourth, southbound flows turned from an outflow in May to an inflow of US$3.5bn in June, but the proxy indicator based on foreign passive CSI 300 fund flows used after the discontinuation of daily northbound net flow disclosure turned negative in June. Fifth, active funds increased exposure to semiconductors, technology hardware, media and entertainment, while reducing exposure to consumer discretionary distribution and retail, insurance, food beverage and tobacco.

Analysis framework

The report uses a dual-track framework of fund flows and positioning: on the flow side, it distinguishes foreign-domiciled active/passive funds, domestic ETFs and mutual/private fund AUM, southbound flows, and a passive CSI 300 fund flow proxy; on the positioning side, it tracks large international and US active fund samples, comparing monthly, quarterly, and year-to-date changes in the Top 50 China/HK holdings and GICS industry groups.

Methodology notes

• fund_flow_trackingforeign-domiciled active and passive fund flow analysis

  Foreign-domiciled active/passive fund flows

  The report separates active and passive capital by US- and Europe-domiciled funds to measure their monthly and cumulative net inflows or outflows into China/HK equities.

• liquidity_proxyCSI 300 ETF flows as National Team proxy

  Using CSI 300 ETF flows as a proxy for "National Team" buying and selling

  The report uses passive CSI 300 ETF flows to estimate cumulative buying and selling activity by the "National Team," and also observes changes in related CSI 500 and CSI 1000 flows.

• northbound_proxyforeign passive funds flow to CSI 300

  Using foreign passive CSI 300 fund flows as a proxy for northbound net flows

  Because daily northbound net flow data has stopped being disclosed since August 19, 2024, the report instead uses flows from foreign-domiciled passive funds into the CSI 300 as a substitute indicator.

• fund_positioninglargest active fund universe position aggregation

  Large active fund holdings aggregation

  The SICAV sample includes the 40 largest active funds each in MorningStar China Equity and Emerging Markets Equity, with combined AUM of about US$167bn; the US sample includes the 20 largest China Equity and 40 largest Emerging Markets Equity active funds, with combined AUM of about US$309bn. Holding changes are aggregated by security market value, and because not every fund discloses month-end positions, the estimates are primarily intended as market indicators.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China/HK equities

  Core covered asset

  Strengths

  The rebound in southbound flows, continued growth in domestic margin financing balances and private fund AUM, provide local liquidity support.

  Weaknesses

  Outflows from foreign-domiciled funds accelerated in June, with both active and passive funds in net outflow.

  Comparison

  Cumulative foreign inflows in 1H26 were 50% of full-year 2025 inflows, while cumulative southbound inflows in 1H26 were only 21% of full-year 2025 inflows.

  Risks

  If foreign outflows continue and domestic liquidity momentum weakens, valuations and market sentiment may come under pressure.

• Broad A-share ETFs / CSI 300

  Observation target for "National Team" trading and northbound proxy

  Strengths

  CSI 500 and CSI 1000 flows were broadly stable.

  Weaknesses

  Estimated CSI 300 ETF outflows reached US$23bn, and foreign passive CSI 300 flows turned into outflows in June.

  Comparison

  CSI 300 ETF outflows widened from US$21bn in May to US$23bn in June.

  Risks

  If ETF redemptions continue to expand, market support may weaken.

• Southbound flows / HK equities

  Main channel for Chinese domestic capital allocation to the Hong Kong market

  Strengths

  Southbound flows turned from an outflow in May to a net inflow of US$3.5bn in June.

  Weaknesses

  Cumulative inflows in 1H26 were only 21% of full-year 2025 inflows, so sustainability still needs to be observed.

  Comparison

  May saw an outflow of US$0.4bn, while June rebounded clearly.

  Risks

  If Hong Kong market performance or risk appetite weakens, the rebound in southbound flows may slow.

• AI- and technology-related stocks

  Direction of active fund overweighting

  Strengths

  Active fund managers increased exposure last month to semiconductors, technology hardware, media and entertainment, and the report mentions strong gains in AI and technology stocks.

  Weaknesses

  Crowding and valuations may become sensitive as capital concentration rises.

  Comparison

  Compared with sectors being reduced such as consumer distribution and retail, insurance, food beverage and tobacco, technology-related sectors saw a more pronounced increase in active weights.

  Risks

  If the technology rally retreats or earnings delivery falls short, the overweighted direction may face pullback risk.

Key data

• June foreign-domiciled fund outflowsUS$3.6bnThe third-largest single-month outflow since 2025, behind only April 2025 and March 2026.
• June foreign passive fund outflowsUS$1.3bnPassive funds shifted from prior inflows to net outflows.
• June foreign active fund outflowsUS$2.2bnActive fund outflows accelerated versus earlier periods.
• 1H26 cumulative foreign fund inflowsUS$6.9bnAbout 50% of total inflows for full-year 2025.
• Global EM funds underweight China1.4ppt UWBased on data for most funds disclosed through May 2026, the underweight remained stable.
• EM funds underweight China5.2ppt UWThe underweight narrowed.
• AxJ funds underweight China0.9ppt UWThe underweight narrowed.
• June estimated CSI 300 ETF outflowsUS$23bnAs a proxy for "National Team" selling, above US$21bn in May.
• June southbound net inflowsUS$3.5bnA notable rebound from the US$0.4bn outflow in May.
• 1H26 cumulative southbound inflowsUS$36bnEquivalent to 21% of full-year 2025 southbound inflows.
• June new SSE account openings2.9mnAbove 2.8mn in May.
• June average daily net inflows from small A-share tradesRmb25bnBelow Rmb33bn in May, indicating marginal weakening in retail trading activity.
• A-share margin financing balanceRmb3.0tnUp 4% month on month, reaching another record high.
• Increase in private fund AUM in MayRmb69bnThe increase was below Rmb386bn in April, but has risen 42% cumulatively since mid-2025.
• Increase in domestic hybrid fund AUM in JuneRmb45bnMainly representing active funds, continuing steady growth.

Impact & implications

Fund flow signals are diverging: foreign outflows and the turn to negative foreign passive A-share flows are marginally unfavorable for international capital support for China/HK equities, and "National Team" ETF redemptions may reduce market support; however, growth in domestic leveraged capital, private and active fund AUM, and a rebound in southbound flows suggest that local capital may still cushion the pressure from foreign withdrawals. At the sector and stock level, active fund additions are more concentrated in technology and AI-related areas, while reductions are tilted toward consumption, insurance, and some large internet/hardware names, indicating that market risk appetite still favors growth technology.

Risks

• Outflows from foreign-domiciled funds may continue and weaken marginal international capital support for China/HK equities.
• "National Team" ETF selling remains elevated; if it expands further, expectations for market support may decline.
• Net inflows from small retail trades fell from Rmb33bn in May to Rmb25bn in June, indicating marginal weakening in trading activity.
• Fund holding data does not include month-end positions for all funds, so the report's estimates are more suitable as market indicators rather than complete factual disclosure.
• Daily northbound net flow data has stopped being disclosed, and CSI 300 foreign passive fund flows are only a substitute proxy, which may involve methodology bias.

What to watch

• Whether foreign-domiciled active and passive funds continue to see outflows in July.
• Whether CSI 300 ETF outflows expand further from US$23bn in June or begin to ease.
• Whether A-share margin financing balances continue rising after reaching a new high of Rmb3.0tn.
• Whether private fund AUM and domestic hybrid fund AUM can continue growing.
• Whether the June rebound in southbound flows can turn into sustained inflows.
• Whether active fund overweighting in semiconductors, technology hardware, media and entertainment continues, and whether underweighting in consumption, insurance, and food beverage expands.