CHINESE investors are reducing their exposure to stock markets and investing in safe-haven money market funds (MMFs) as stock markets decline from multi-year highs on worries over policy tightening and lofty valuations.

The trend since mid-February marks a reversal in the risk-seeking behavior seen between April 2020 and January 2021, and caused the country’s blue-chip index to post its worst monthly performance in a year in March.

Foreign investors also turned cautious, their buying via the Hong Kong-mainland stock connect program slumping in March as the yuan also depreciated against a buoyant U.S. dollar.

MMFs are traditionally considered low-risk and liquid as they invest in higher quality assets, including government bonds.

The Hwabao WP Listed Money Market ETF, the largest money market ETF listed on the Shanghai Stock Exchange, saw its total units increase 21 percent to 1.77 billion April 8, from 1.46 billion Feb. 18.

Analysts said the stock market correction since mid-February was mainly driven by fears over frothy valuations after the government set a conservative economic growth target that implied policymakers wanted room to rein in financial market bubbles.

The Yinhua Money Market EFF, another major money market ETF listed on the Shanghai Stock Exchange, saw its total units increase 30 percent to 1.3 billion April 8, from 1 billion Feb. 18. (SD-Agencies)