Foreign investors continue buying as stocks fluctuate
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E-mail China Daily, June 10, 2022
For the ninth trading day in a row, northbound capital reported net inflows on Thursday, but that could not stop the benchmark Shanghai Composite Index and the Shenzhen Component Index from declining for the second consecutive day.
While the SCI closed 0.76 percent lower, the Shenzhen gauge fell 1.85 percent on Thursday.
Northbound capital, however, recorded the longest period of net inflows for the year as overseas investors continued to buy shares of onshore companies via the stock connect mechanisms linking Shanghai, Shenzhen and Hong Kong.
They spent a net 3.6 billion yuan ($539 million) on certain A shares on Thursday, confirming their interest in China assets has not been impaired by the temporary market fluctuations.
As of Thursday, the aggregate net inflow of northbound capital so far this month reached nearly 30 billion yuan, surpassing the total amount in May.
According to market tracker Wind Info, since early May, overseas investors have increased their exposure to A-share companies in sectors like electric equipment, electronics, chemical, engineering equipment and automobile. Electric equipment producers have attracted the most northbound capital－about 68 billion yuan－since May.
Experts from UBS Global Wealth Management wrote to their clients on Thursday that the MSCI China Index, which tracks 744 onshore and offshore Chinese listed companies, has surged nearly 6 percent ever since Beijing relaxed epidemic control measures on May 29 and Shanghai resumed normal life and business operations on June 1.
The CSI 300, which monitors 300 large-cap A-share companies, has also climbed 4 percent this month.
In UBS experts' view, China assets will benefit from expected removal of travel limits and economic recovery. Apart from A shares, opportunities will emerge in oil, copper and currencies closely related to large commodities.
Ethan Wang, head of investment strategy for wealth management at Standard Chartered China, said the A-share market is likely to outperform other markets this year, given the former's low valuation and the stimulative monetary and infrastructure policies that China will implement in the near term.
Chinese regulators have enhanced the capital market's opening-up. The China Securities Regulatory Commission jointly announced with the Securities and Futures Commission of Hong Kong on May 27 that qualified exchange traded funds traded on the Chinese mainland bourses and the Hong Kong exchange will be included in the stock connect mechanisms.
CSRC Vice-Chairman Fang Xinghai said at a conference in late May that foreign investor interest in A-share companies, which has been mounting over the past few years, will remain unchanged this year. The A-share market's relative investment value has become increasingly noticeable from a global perspective, he said.
Global asset managers have sped up their mapping in China amid China's continued efforts in opening up its capital market.
On May 30, French financial and insurance services provider AXA completed its registration with the Asset Management Association of China as a wholly owned foreign enterprise (WOFE) that will function as a private fund manager (PFM) in the country, with its physical operation based in Shanghai. Including AXA, there are 36 WOFEs functioning as registered PFMs in China.
In early May, Hamilton Lane, CCB International, CDH Investments and JAFCO Asia have been approved by the Shanghai municipal financial regulatory bureau as Qualified Foreign Limited Partners. Under this program, overseas capital can be invested in China's onshore private equity firms.
Anzhong Investment and Black-Rock have received consent to operate as Qualified Domestic Limited Partners, which indicates that their future clients in the Chinese mainland can invest in overseas markets with their products.
