Bloomberg is reporting that foreign investors are dashing for the exits after cashing out of China’s world-beating equity rally. But Asia Unhedged suspects they’ll be back before too long.

Foreigners sold a net 1.7 billion yuan  ($274 million) of Chinese shares via the Shanghai-Hong Kong exchange link in the week through Monday, while the two biggest Hong Kong exchange-traded funds tracking mainland stocks had withdrawals of $622 million. Bloomberg says money flowed out of the link again on Tuesday as the Shanghai Composite Index dropped from a seven-year high.

Alas, international investors appear to be getting cold feet about the recent Chinese rally. This, despite the fact that Chinese mainland traders are opening new stock accounts at the fastest pace ever as officials throw their weight behind the gains that have increased China’s market capitalization two-fold in the past year to a record  $6.5 trillion.

Domestic and foreign investors are of two minds. Locals are awaiting the uplifting effects of a monetary stimulus by regulators, while the politically correct view outside China is that the government isn’t doing enough to kick China’s economy into higher gear after a tepid start to the year.

“The A-share market is in a bubble stage,” said Wenjie Lu, a UBS strategist in Shanghai told Bloomberg. “It makes sense for foreign investors to take profits.”

Bloomberg says overseas investors sold a net 1.3 billion yuan of mainland shares through the exchange link at the local close. The Shanghai Composite fell 1%, after earlier gaining as much as 1.3 percent. It traded at 14.5 times estimated earnings for the next 12 months on Monday, the most expensive level since November 2010.

On the ETF side, the $9 billion iShares FTSE A50 China Index ETF has recorded outflows of $226 million during the past week, while the CSOP FTSE China A50 ETF had withdrawals of about $396 million, according to data compiled by Bloomberg.

The Shanghai Composite’s relative strength index reached 81 on Tuesday, the highest among major markets worldwide. Readings above 70 are a signal to some traders that shares have climbed too far, too fast.

Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong, said last week that while shares may be in bubble territory, they have further to climb as China’s government maintains its support for the rally and keeps borrowing costs low. His target of about 4,000 for the Shanghai Composite implies a gain of 5.6% from Monday’s close.

Mainland traders opened about 1.7 million new stock accounts in the week ended March 27, the most on record and a 47% jump from the previous week, China Securities Depository and Clearing Co. said on Tuesday.

Investors will get another read on economic growth Wednesday as China releases official manufacturing data. The Purchasing Managers’ Index probably declined to 49.7 in March from 49.9 in February, according to a Bloomberg survey of economists.

A preliminary PMI from HSBC Holdings Plc and Markit Economics came in at 49.2 on March 24, missing the median estimate of 50.5. Industrial output and investment trailed projections in the first two months of 2015.

“If you look at all the macro numbers, they are just deteriorating,” Lu said. “Foreign investors look at the China market more from a top-down approach. It is natural for them to be more cautious.”

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