In many law cases, one of the over used phrases is follow the money. It is over used, but it is true. If you follow who had or would monetarily benefit, you can narrow the suspect pool to more plausible suspects. It is not a perfect method, but it helps. In investing, follow the money means asking where are people or individuals investing their money?

In an article by Summer Zhen and Patturaja Murugaboopathy of Reuters, global investors are increasing looking at other countries besides China to invest their money.

Reuters analysis shows a massive jump in the assets of emerging markets (EM) mutual funds and exchange traded funds that exclude China. The countries which or benefiting include: Mexico, India, Vietnam and Brazil.

Refinitiv data shows China focused mutual funds suffered a net outflow of $674 in the 2nd quarter of this year.

The ishares MSCI Emerging Markets exChina ETF, the world’s largest emerging market ex-China ETF whose biggest holdings are firms in Taiwan, South Korea and India attracted a record $1 billion inflow in the first half of 2023.

Data from Goldman Sachs showed that as of mid-July, foreign buying of emerging markets Asia ex-China equities amounted to $39 billion over 12 months, the first time since 2017, the buying exceeded inflows into mainland China equities.

Why is the money leaving China, because the Top 10 China-focused mutual funds slumped over 40% in 2021 and growth did not happen in 2022 or 2023.

The global supply chain is moving, and money is flowing into Mexico, India, Indonesia and Vietnam. There are reasons why the government of China is trying to stimulate growth in the country.

Linking to dividend paying stocks, for the past few decades investing in China was an easy thing to do and many funds paid well. In the US manufacturing moved from the US to China and now it is moving from China to other countries. The process is interesting to see how quickly the landscape can and does change. For the new manufacturing countries, growth will be easily seen, for China it has depend on a domestic economy including government incentives. For companies moving, it is in the best interest of the company not the country, and you are investing in the company. Follow the money is a good rule to see what is happening

There are more questions than answers, till the next time – to raising questions.