Why foreign investors are cashing out of China: ‘The A-share market is in a bubble stage’

International investors are cashing out of China\’s world-beating equity rally.

Foreigners sold an internet 1.7 billion yuan (US$274 million) of Chinese shares through the Shanghai-Hong Kong exchange link within the week through Monday, while the two biggest Hong Kong exchange-traded funds tracking mainland stocks had withdrawals of US$622 million. Money flowed out of the link again on Tuesday as the Shanghai Composite Index dropped from a seven-year high.

Global investors are losing faith within the rally even while mainland traders open stock accounts in the fastest pace on record and authorities endorse gains that have doubled China\’s market capitalization over the past year to some record US$6.5 trillion. While locals are focused on prospects for monetary stimulus, UBS Group AG says foreigners are worried it hasn\’t done enough to revive the world\’s second-largest economy.

It is sensible for foreign investors to consider profits

\”The A-share market is in a bubble stage,\” said Wenjie Lu, a strategist at UBS in Shanghai. \”It is sensible for foreign investors to take profits.\”

Overseas investors sold an internet 1.3 billion yuan of mainland shares through the exchange link in the local close. The Shanghai Composite fell 1%, after earlier gaining as much as 1.3%. It traded at 14.Five times estimated earnings for the following 12 months on Monday, the costliest level since November 2010.

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