06.02.2023
As China eases its zero-to-zero policy, there are signs of a sharp return of foreign capital to Chinese stocks. Can this boom continue?
(Deutsche Welle Chinese website) Foreign funds have recently poured into the stock markets of mainland China and Hong Kong in large quantities. The scale is unprecedented since 2018. According to data from EPFR Global, a research and analysis company, in the four weeks to January 25, foreign active fund managers invested a total of US$1.39 billion in mainland China stocks and as much as US$2.16 billion in Hong Kong stocks.
Active managers are more actively involved in asset portfolios than passive managers follow the overall stock market index. The US financial media CNBC quoted EPFR’s quantitative strategy manager Steven Shen (Steven Shen, transliteration), saying that “active investment managers are so optimistic about the Chinese market for the first time in five years”; , “In the very short term, more inflows from active managers can also be expected”.
According to a CNBC report, at the beginning of 2022, only a few investment institutions advocated that it was time to buy Chinese stocks; Stephen Shen said that the pace of foreign hot money pouring into China is now faster than then. At that time, the Beijing government emphasized political stability; in addition, the high spread of the Omicron virus was still worrying, coupled with the two-month lockdown of Shanghai, and the government’s strong restrictions on corporate activity space, made local investors cautious .
After China relaxed its epidemic prevention measures, the tourism industry picked up during the Lunar New Year this year, and local investors gradually regained market confidence. Wealth management company Hywin Chief Financial Officer Lawrence Lok (Lawrence Lok, transliteration) said in early January that in view of changes in China’s overall economic environment, more funds will return to the stock market in 2023; last year, many customers chose to hedge.
Stephen Shen pointed out that investment in real estate and renewable energy has increased, while the technology sector has remained relatively flat; investment in Chinese companies listed in the United States has also been relatively inactive. Analysts at Morgan Stanley pointed out that long-only managers in the United States believe that they are only now beginning to gradually increase their weightings in China, and expect to see further investment inflows in the second quarter of 2023 .
Economic aspect |
27.07.2022
Asset manager Bernstein warned in late January that growth in Chinese stocks would be limited if active investors in the U.S. and local Chinese investors did not buy. It is still hard to say whether the “extreme” influx of funds in the past three months will continue in the next three months, so investors should remain cautious.
CNBC quoted Bruce Liu, CEO of Esoterica Capital, as saying that the development of the situation in China over the past two years has left “scars” in the hearts of many Chinese investors, and their confidence in the market has not yet been restored. For these people, it is more important to spread risk globally than to ride the current boom and return to Chinese stocks.
（CNBC，EPFR）
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