U.S. fund investors hike China exposure despite trade strife

FILE PHOTO: Shipping containers, including one labelled "China Shipping," are stacked at the Paul W. Conley Container Terminal in Boston, Massachusetts, U.S., May 9, 2018. REUTERS/Brian Snyder/File Photo

NEW YORK (Reuters) - U.S. fund investors apparently saw a buying opportunity in China despite ongoing trade tensions, adding their most exposure to that market since January, Lipper data for the latest week showed on Thursday.

Investors bought $572 million shares in U.S.-based funds that invest primarily in Chinese equities during the week ended Wednesday, according to the research service.

U.S. and Chinese officials ended two days of talks on Thursday with no major breakthrough as the bilateral trade war escalated with the activation of another round of dueling tariffs on $16 billion worth of each country’s goods.

Yet investors are expecting Beijing to continue counteracting the effects of the dispute with increasingly relaxed monetary and fiscal policies.

China last week reported downbeat economic data, but rolled out a $14 billion urban railway plan and pushed local governments to speed up issuance of special bonds for the funding of infrastructure projects.

“They’re continuing to do more and more,” said Komson Silapachai, vice president of research and portfolio strategy at Sage Advisory Services Ltd. “We just think that China has reversed course.”

But there were still some signs of risk aversion in the market. Money market funds, where investors park cash, collected $4.2 billion during the weekly period, after investors pulled out $2.2 billion the week before, Lipper said.

U.S.-based energy sector mutual funds and exchange-traded funds (ETFs) posted $701 million in withdrawals during the week, the most pulled from those funds since September 2016, the data showed.

The S&P 500 energy sector .SPNY has fallen 3.7 percent over the past three months, including dividends, following oil prices lower. Crude prices have been hurt by worries about the global economic growth outlook given trade tensions.

Reporting by Trevor Hunnicutt; editing by Jennifer Ablan, G Crosse