Foreign investors are buying up Chinese assets.
Overseas hedge funds have increased their holdings of Chinese stocks for the fourth consecutive week, Goldman Sachs said in its latest report. Last week, China recorded the largest capital inflows among emerging market countries, reaching 4%, according to data from Bloomberg.Mollybloompoker.88 billion US dollars (about 3.5 billion yuan).
In terms of northbound funds, the net inflow of northbound funds was 4.776 billion yuan on May 22, and the net purchase amount for the year increased to 95.99 billion yuan, exceeding the net purchase amount for the whole year of 2022 and 2023. There are signs that global enthusiasm for the allocation of Chinese assets is accelerating.
Standing at the current point of time, investors may be more concerned about whether this round of market can continue. Will foreign investors continue to bet on Chinese assets? Andrea Cicione, head of research at GlobalData TS Lombard, wrote in the latest report that Chinese stocks with relatively low valuations are still attractive and that the momentum for investors to return to Chinese stocks has increased and is likely to continue Analysts at Alpine Macro, a global macro research firm, also said the Chinese stock market would continue to rise further after a strong rebound over the past two months, citing improved economic conditions against the backdrop of more government stimulus measures.
The periphery is heavy
Overseas hedge funds have increased their holdings of Chinese stocks for the fourth consecutive week, Goldman Sachs said in its latest report.
Hedge funds have bought Chinese stocks in seven of the past eight weeks, according to the Goldman Sachs brokerage team. But the report did not disclose the exact amount of the purchase.
Last week, China recorded the largest capital inflows among emerging market countries, with $488 million, of which $289.6 million went to iShares MSCI China ETF, according to Bloomberg data.
Brendan McKenna, emerging markets foreign exchange strategist at Wells Fargo, said the reason for buying Chinese stocks every week was growing optimism that Beijing would do more to support the economy.
In fact, data from northward capital can also be found that foreign capital continues to net inflow into the A-share market.
According to Wind data, the net inflow of northbound capital reached 4.776 billion yuan on May 22nd, and the net inflow increased to 21.746 billion yuan in a single month, marking the fourth consecutive month of net purchases since February. From the perspective of the annual dimension, the cumulative net purchase amount during the year has reached 95.99 billion yuan, exceeding the annual net purchase amount in 2022 and 2023.
Another sign of foreign bets on Chinese assets is that a number of Wall Street bosses have increased their allocation of Chinese assets at low levels. These include Michael Burry, the famous short seller, and Appaloosa, the management company of billionaire investor David Tepper.
With the increased allocation of funds to Chinese stocks, A shares, Hong Kong stocks and US-listed Chinese stocks staged a big counterattack.
On May 22, the A-share market fluctuated in a narrow range, and the three major indexes collectively received dividends, of which the Prev index closed up 0.02%, the Shenzhen Composite Index rose 0.12%, and the gem index closed up 0.88%. So far this year, the Shanghai index has risen 6.2 per cent, the CSI 300 index has risen 7.4 per cent, and Hong Kong's Hang Seng index has soared 12.7 per cent.
How can I get there in the future?
Standing at the current point of time, investors may be more concerned about whether this round of market can continue. Will foreign investors continue to bet on Chinese assets?
Andrea Cicione, head of research at GlobalData TS Lombard, wrote in the latest report that current valuations of Chinese stocks are roughly in line with COVID-19 's pre-epidemic average. Given that hot Southeast Asian markets are nearing profit-taking, relatively low-priced Chinese stocks remain attractive.
MollybloompokerHe further pointed out that the momentum for investors to return to Chinese stocks has increased and is likely to continue. Earlier, LPL Financial strategist Adam Turnquist also said that the bull market in Chinese stocks will continue.
Analysts at Alpine Macro, a global macro research firm, also wrote in a report that China's stock market will continue to rise further after a strong rebound over the past two months, citing improved economic conditions against the backdrop of more government stimulus measures.
In addition, Goldman Sachs said in its latest research that the probability of the Chinese stock market entering a technical bull market is 60%, with an average potential maximum return of 35% over the next six months.
Analysts at Goldman Sachs stressed that the potential upside for the MSCI China index over the next 12 months was 25 per cent, 8 per cent and-13 per cent, respectively, under bull, benchmark and bear market scenarios.
Compared with a few years ago, Chinese stocks are less sensitive to the bilateral situation between China and the United States, mainly because the market has a better understanding and pricing of these risks, Goldman Sachs said. this explains why Chinese stocks remained strong after the US government announced new tariffs last week.
Goldman Sachs raised its 12-month target for the MSCI China Index from 60 to 70 and the CSI 300 from 3900 to 4100, maintaining an "overweight" rating on mainland A shares.
The property market also sends a good signal.
Analysts at Alpine Macro said China's announcement of increased property support marked a sharp shift in the country's stance in response to the downturn in the property market and reflected its attitude of "doing whatever it takes" to prevent further weakness in the property market.
Since the end of April, there have been continuous favorable policies from the central to local governments, especially in mid-May, with the reduction of the down payment ratio, the abolition of the floor of interest rates, and the reduction of provident fund interest rates. The current housing loan policy has been more relaxed than in 2016.
Alpine Macro analysts said in a report that the big shift in housing policy will help reduce financial pressure on developers and provide a bottom line for their asset prices.
In fact, judging from the current market situation, the increase in the favorable policy of the property market has indeed strengthened the market confidence in the short term. According to CRIC monitoring, the transaction area of commercial housing in 65 key cities across the country in the 20th week of 2024 was 3.3089 million square meters, which was basically the same as that in the 19th week, and increased by 17% compared with the average of April 2024.
Among them, the repair of the third and fourth lines is better than that of the first and second lines, and the weekly trading volume of 40 third and fourth lines has been significantly better than the weekly average in March this year.
Kerry Research said in its latest report that from the point of view of project visits and subscriptions, there has been a steady increase in market activity in many places, and key cities can be divided into the following categories:
First, hot Shanghai, Chengdu, Xi'an and so on, the market transaction stopped falling in the past week, due to the core regional network celebrity plate concentrated push, making the market hot high.
Second, the market heat has obviously rebounded in the short term, with Shenzhen and Wuhan as typical examples, and the overall transaction has been significantly better than the weekly average level in the second half of last year. Typical representatives such as Shenzhen, hot-selling news frequently, new orders to accelerate shipments.
Third, the number of visits to projects in most cities such as Beijing, Hangzhou, Nanjing, Suzhou, Hefei, Zhengzhou and other cities has steadily increased, and market activity has increased, but it has not yet been reflected in the transaction side.
Reflecting on the market level, on May 22, the real estate chain broke out again, and real estate services, property management, real estate development, building decoration and other sectors collectively rose sharply. Among them, Vanke A's turnover reached 6.822 billion yuan, ranking first in the entire market; the intraday high rose nearly 8%. Since April 25, it has rebounded from its low point by more than 50%.
In addition, the leader of the real estate services sector-I Love My Home (000560) has seen a cumulative increase of nearly 140% since April 25.
China Post Securities said that it is optimistic about the valuation repair during the policy window in the next few months, but whether it can last will ultimately depend on whether the subsequent fundamentals support it.
Proofread: Wang Wei