Morgan Stanley reported that foreign capital net inflows into Chinese stocks rebounded to $4.6 billion in September, marking the highest monthly level since November 2024, primarily driven by $5.2 billion in inflows from passive funds, while active funds recorded a modest $0.6 billion outflow.

Analysts including Chloe Liu stated that following the significant inflows from U.S. funds into Chinese stocks since mid-July, European passive funds also began catching up in September.

As of September 30, foreign passive funds have accumulated $18 billion in inflows year-to-date, surpassing last year's $7 billion level.

Foreign active funds recorded cumulative net outflows of $12 billion, lower than last year's $24 billion in outflows.

Global funds' underweight position in China narrowed to 1.2 percentage points, while Asia-Pacific (excluding Japan) funds expanded their overweight position to 1.0 percentage point. In contrast, emerging market funds increased their underweight position in China to 3.0 percentage points.

Among sectors with increased allocations, active managers increased holdings most significantly in capital goods and semiconductors, while reducing positions most in insurance, durable consumer goods, and apparel.

Among sectors with reduced allocations, the largest increases in underweight positions were in banking and healthcare sectors, while the largest reductions in underweight positions were in consumer discretionary distribution & retail and materials sectors.

Alibaba, CATL, and JD.com experienced the largest increases in holdings, while Tencent, Ping An Insurance, and Pop Mart saw the largest reductions in holdings.