China Is Being Left Out by a Record Number of New EM Stock Funds

Launches of emerging-market equity funds that exclude China have already reached a record annual high in 2023, as investor concerns grow over weak returns as well as the risks of investing in the nation.

Fourteen such funds have started this year, following last year’s count of 13, according to data compiled by Bloomberg. The latest launches include vehicles from Wall Street titans including Goldman Sachs Asset Management, BlackRock Inc. and Lazard Asset Management.

The trend is another signal of China’s declining heft in the global money pool, following a record outflow from the nation’s stocks last month. Doubts over the investability of Chinese equities have gathered steam as Beijing’s efforts to restore confidence have limited impact and as the West steps up oversight of exposure to Asia’s largest economy.

Exclusion from EM funds “sends a signal to investors that China is no longer a reliable investment destination,” said Manish Bhargava, a fund manager at Straits Investment Holdings in Singapore. While it’s too early to talk about the long-term impact, “this is a significant development that will have implications for investors, businesses, and policymakers alike.”

EM Ex-China Fund Launches Up by Record in 2023