China-focused equity funds on course for weakest performance in three years

(Reuters) - Overseas equity funds with exposure to Chinese equities are on course to deliver their weakest performance in three years, as the stocks were hit by an economic slowdown, a tech crackdown and an increase in default risks in the property sector.

Refinitiv Lipper data showed that China-focused overseas equity funds have shed 9.2% on average so far this year. They delivered a return of 47.1% and 33.3% in 2020 and 2019 respectively, the data showed.

Profunds UltraChina ProFund;Investor, BCAP China Technology, TMB China Opportunity and MTF TR (E) Bluestar China Internet Software (4D) were leading the decliners this year, dropping more than 25% each so far this year.

China's Shanghai Composite index has gained just 3.45% this year, and is the fourth worst performer among Asian stock markets this year, based on Refinitiv Lipper data.

"Major regulatory reforms collided with a potential default scenario with some of the largest property developers after the country tightened its funding sources," fund research group Morningstar said in a report.

"The regulatory consolidation in China swept up large e-commerce and education names. It comes as no surprise that Greater China-focused funds saw a deep drawdown," it said.

Similarly, China-focused overseas bond funds have risen just 0.4% on average, compared with a gain of 8.5% in 2020.

Among bond funds, HSBC China High Yield Bond Fund Acc TWD, BEA Union Investment China High Yield Income A USD Dis and Jih Sun China High Yield Bond Fund A TWD led the decliners this year, based on Refinitiv Lipper data.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru. Editing by Jane Merriman)