Chinese stocks have erased 4½ years of gains as foreign investors flee at record pace

China’s CSI 300 index
XX:000300
fell by more than 1% to finish Monday’s session at 3,474.24, the lowest closing level since Feb. 21, 2019, according to FactSet data. In U.S. dollar terms, the index has fallen nearly 15% since the start of 2023. The index includes stocks traded in Shanghai and Shenzhen.

Investors dumped Chinese stocks Monday on reports in the domestic press that Foxconn
2354,
-2.19%,
a key supplier for Apple Inc.
AAPL,
+0.03%,
had seen some of its mainland offices raided by tax authorities. The company, officially known as Hon Hai Precision Industry Co., is based in Taiwan. Its shares slumped in response.

See: Chinese tax authorities recently searched Apple supplier Foxconn

Weakness in Chinese markets hasn’t been restricted to stocks. China’s currency, the yuan, has weakened precipitously since the start of 2023. Yuan traded in China’s domestic markets recently touched its lowest level against the U.S. dollar since December 2007 last month, although it has been more or less steady since then as Beijing has scrambled to stave off further depreciation, currency strategists said.

The yuan
USDCNY,
-0.02%
traded at 7.3 to the U.S. dollar on Monday, and since the start of the year, the greenback has appreciated more than 6% against its Chinese rival.

A team of strategists at Rabobank said currency-market interventions were one reason why Chinese investors dumped U.S. stocks and bonds at the fastest pace in four years in August, according to data from the U.S. Treasury Department.

See: China dumps most U.S. securities in 4 years, perhaps to defend a weakening yuan

Also: Reports that China has been dumping Treasury bonds have been greatly exaggerated

Chinese markets have struggled as the world’s second-largest economy has reopened this year following a series of strict COVID-19 lockdowns. Concerns about slowing economic growth, potential systemic risks posed by struggling real-estate developers, and a worsening geopolitical rift between Washington and Beijing have prompted foreign investors to pull money from Chinese markets at a record pace, according to data from Northbound Stock Connect, which allows foreign investors to access Chinese markets via Hong Kong.

Data analyzed by a team of macro strategists at MUFG Bank showed foreign investors have sold $3.1 billion in Chinese stocks on a net basis through Oct. 17, following $5.1 billion in outflows in September, and more than $10 billion in August.

China’s economy grew by 4.9% during the third quarter compared with the same period a year earlier, which was slower than the rate of growth from the previous quarter, but stronger than many economists had expected.

Weakness in Chinese stocks also impacted trading in the U.S., where several popular exchange-traded funds tracking Chinese markets sold off. The KraneShares CSI China Internet ETF
KWEB
was down 2.4% shortly after the U.S. market opened. Meanwhile, the iShares MSCI China ETF
MCHI
also traded lower.

Hong Kong-traded shares also slumped, with the Hang Seng Index
HSI00,
-0.68%
falling 0.7% to 17,172.13.

U.S. stocks were also trading lower on Monday, with the S&P 500
SPX
down 0.3% while the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
briefly surmounted the 5% level for the first time since 2007.