Market mayhem ahead? U.S investors might be forced to exit $800 billion in Chinese equities if tensions heat up, says top investment bank

A financial disruption wave may be coming for American investors as Goldman Sachs has warned regarding intensifying US-China war, with full financial decoupling potentially making American investors dispose of over $800 billion of Chinese stocks, as per a report.

What’s at Stake?

This possible mass exodus consists of $250 billion worth of US-listed Chinese ADRs (American Depositary Receipts), $522 billion worth of Hong Kong-listed shares, and a portion of mainland-traded A shares, as per GuruFocus.

The reason is the increased political pressure and a new wave of warnings from US officials. Treasury Secretary Scott Bessent recently stoked fears by announcing that "all options are on the table," reviving concerns that first emerged during the Trump administration regarding delisting Chinese companies, according to GuruFocus.


ALSO READ: Big rift between Elon Musk and Donald Trump: The President appears to have banned the Tesla CEO from participating in any China-related discussions; here are the details

Goldman Sachs’ Estimates

Goldman Sachs highligted the possible consequences, including if investors have to sell out, the bank estimates a 9% drop in ADR values and a 4% drop in the MSCI China Index, as per the report. While US investors can sell A shares in one day, it would take around 119 days to completely leave Hong Kong-listed stocks and 97 days to close out ADR positions, GuruFocus reported.

But the danger is not one-sided. Chinese investors are estimated to own $1.7 trillion in American assets, as per the report. In the event of further escalation, China might respond by selling $370 billion worth of American equities and $1.3 trillion worth of American bonds, according to GuruFocus.

Who’s Most Exposed?

As per the report, the Kraneshares CSI China Internet Fund, the largest US-listed Chinese tech-focused ETF, has 33% of its assets in ADRs, and half of those lack Hong Kong backup listings. With 72% of the fund's ownership being held by US investors, any delisting situation would trigger a significant selloff, according to GuruFocus. JPMorgan has put the estimated index-based passive outflows at $11 billion if Chinese stocks are excluded from major benchmarks, as per the report.

FAQs

How much could US investors lose if forced to sell?
Goldman Sachs estimates ADR values could drop by 9%, and the MSCI China Index could dip by 4%.

How long would it take to sell these Chinese holdings?
A shares could be sold in one day, but it would take 97 days to exit ADRs and 119 days for Hong Kong-listed stocks.