According to a strategy report, January saw capital outflows from emerging markets, with allocation to Chinese markets remaining at moderate to low levels.
Monthly Review of Global Asset Prices: Since the beginning of 2026, frequent geopolitical events have driven commodities to lead global asset gains. Against a backdrop of marginal weakening in the U.S. dollar, emerging market equities have generally outperformed developed market equities. By asset class: 1) In equities, global stock markets mostly rose, with South Korean and Brazilian markets leading gains in U.S. dollar terms. U.S. stocks showed relatively muted performance, fluctuating near highs, while Indian equities declined significantly. 2) In fixed income, U.S. Treasury yields were primarily range-bound. 3) In commodities, Brent crude rose by 14.6%. Industrial and precious metals saw substantial increases, with LME nickel, copper, and aluminum all rising over 10%, while COMEX silver and gold gained 11% and 8.6%, respectively.
Monthly Focus: Despite a weaker U.S. dollar in January, capital did not significantly exit U.S. equity and bond markets. Inflows into U.S. stocks remained high but volatile, while inflows into non-U.S. equity markets decreased marginally. From the start of 2026 to February 4, the U.S. market attracted $44.9 billion in inflows, while non-U.S. equity markets saw inflows of $2.3 billion. Over the same period, the U.S. bond market absorbed $81.8 billion, with U.S. Treasuries accounting for $6.8 billion, and non-U.S. bond markets attracting $7.3 billion.
Global Asset Flows: In January, China experienced larger relative outflows from its equity and bond markets compared to other major markets. As of February 4, 2026, global money markets saw significant inflows. In fixed-income funds, the U.S. market attracted substantial capital, with $81.8 billion inflows over the past month. In equities, U.S. equity funds received $44.9 billion, while China saw outflows of $96.2 billion. Relative to assets under management (AUM), both Chinese fixed-income and equity funds experienced heavy outflows, with relative outflow ratios reaching 11.0% and 7.2% over the past month, respectively. In U.S. equity sectors, January saw large inflows into energy and industrials, while real estate and utilities sectors experienced outflows.
China Equity and Bond Flows: In January 2026, emerging market equity funds saw external outflows of $51.5 billion, while Chinese equity funds recorded outflows of $96.2 billion. In fixed income, emerging market bond funds had external outflows of $7.2 billion, and Chinese bond funds saw outflows of $17.0 billion. Breaking down by investor type, foreign capital flowed into Chinese equities in January, while domestic capital exited. Foreign inflows totaled $11.6 billion, compared to $3.3 billion in December, while domestic outflows reached $108.0 billion, reversing an inflow of $16.0 billion in December. By strategy, active funds were the main drivers of inflows into emerging markets and Chinese equities, while passive funds saw significant outflows. Passive equity funds experienced outflows of $58.1 billion from emerging markets in January, a sharp increase from December’s $34.7 billion inflow. Outflows from Chinese equities via passive funds totaled $98.2 billion in January, compared to an inflow of $18.2 billion in December. Active equity funds, however, saw inflows of $6.7 billion into emerging markets and $2.1 billion into Chinese equities in January, reversing December’s outflows of $0.7 billion and $0.5 billion, respectively.
Global Country Allocation: In December 2025, global allocation to U.S. equities saw a marginal decline. The allocation ratio to U.S. stocks stood at 61.2%, down 0.8% from October. In percentile terms, allocation to Chinese equities currently sits at the 31.5th percentile over the past decade, indicating potential for future increases. In December, emerging market funds reduced allocation to Chinese equities (including A-shares, Hong Kong stocks, and U.S.-listed Chinese companies), with the ratio slightly declining from November. The current allocation percentile is 37.7%, placing it at a moderate to low level historically.
Risk warnings include short-term asset price volatility potentially not reflecting long-term trends, the possibility of deeper-than-expected recessions in Europe and the U.S., and major shifts in U.S. policy direction under the Trump administration.