Institutional investors are fast becoming speculators at the bourses and not acting as market stabilizers, going by the trend seen last month.
According to statistics from financial information provider Dazhihui, institutional investors, including funds, insurers, and qualified foreign institutional investors (QFII), were competing with each other to offload shares in August.
During the month, the capital outflow was nearly 129.92 billion yuan, the most so far this year.
The CSI 300 Index, a gauge that tracks the performance of the Shanghai and Shenzhen bourses, fell 21.81 percent in August, the second-biggest monthly decline in 15 years.
"What is significant is that most of the funds are simultaneously adopting the same investment strategies. Most of them remained cautious and subdued in the first quarter, but turned active and bought shares in the second quarter and then sold shares heavily in the third quarter. So, we see a high turnover rate for most funds," said Lu Junlong, analyst, China Finance Online, a NASDAQ-listed finance group.
According to TX Investment Consulting Co, the average turnover rate of funds in the first half grew 3.24 times over the same period last year. In 2008, the funds' average turnover rate was 2.09 times in the first half and 1.98 times in the second half.
According to TX Investment Consulting, small fund management firms are more likely to have a higher turnover rate with the figure going up nearly 10 times over same period last year in some cases.