Recently, a number of foreign-funded institutions issued strategic reports. The reporter found that although the mood of “warm at the beginning of the year” was filled with A-share at the beginning of the year, many foreign investors were not afraid of market shocks and insisted on singing more about China. In the first week of the opening of the year of the tiger, there was a large inflow of funds from the north, and more institutions raised the rating of Chinese stocks. In terms of sectors, foreign investors are more optimistic about the investment opportunities of A-Shares in consumption upgrading, “specialization and innovation”, ESG and other sectors.
RMB assets are still favored by foreign investors
In recent years, foreign capital has continued to flow into the Chinese market.
According to the data disclosed by the central bank, in recent years, overseas institutions and individuals have continuously increased their positions in RMB assets, and the overall scale has been increasing; Among them, from the perspective of A-share holdings, they held RMB 21.019 billion at the end of 2019, RMB 34.065 billion at the end of 2020 and RMB 39.420 billion at the end of 2021, increasing year by year.
Goldman Sachs Group recently released a report predicting that international investors will continue to pay attention to and allocate A-Shares in 2022, and the annual net purchase scale of northbound funds is expected to reach US $75 billion, about 480 billion yuan.
Looking to the future, many foreign-funded institutions said that the “restless market” of A-Shares in spring is still possible. The continuous adjustment of the A-share market at the beginning of the year was because it coincided with the adjustment node of institutional allocation, and the market institutions switched from overvalued value to undervalued value. At present, the valuation of A-Shares is at an all-time low and has a high investment cost performance all over the world.
Luca Paolini, chief strategist of Baida asset management in Switzerland, told reporters, “the year of the tiger in China’s stock market is getting better. With the global economy accelerating again under China’s leadership and strong growth of corporate profits, the stock market has a promising prospect after the sharp sell-off in January. Due to the attractive valuation, we upgraded the stock rating to overweight.”
Lu Wenjie, investment director of BlackRock fund, said he was optimistic about the prospect of China’s stock market in 2022. Although the market continued to adjust at the beginning of the year, the economy may stabilize again from the second quarter. “After all, the market style is not invariable. For a shares, there may be many ways to interpret the market style before and after the disclosure period of the national two sessions and the annual reports of listed companies.”
Zhou wenqun, head of stock investment and fund manager of Fidelity International China, also believes that under the macro background of “stability” in 2022, the structural reform of China’s economy will continue, “The trend of A-share market’s’ agglomeration ‘and differentiation will change this year, and the importance of bottom-up fundamental investment will gradually highlight. At the same time, looking at the global market, the core assets of A-share still have strong attraction in terms of profit growth and valuation, which is well confirmed by the continuous inflow of foreign capital into A-share since 2015.”
focus on consumption upgrading, “specialization and innovation” and ESG direction
Since the opening of the year of the tiger, there has been a differentiated market in the A-share market. Driven by the pro cyclical sector, the Shanghai index has strengthened against the trend, with four positive lines in a row, and northward funds have been buying.
According to statistics, in the first week after the Spring Festival, the total turnover of northbound funds was 559.661 billion yuan, with a net purchase of 10.744 billion yuan, of which the most purchased stocks were China Merchants Bank Co.Ltd(600036) , Zijin Mining Group Company Limited(601899) , Wuliangye Yibin Co.Ltd(000858) , Goertek Inc(002241) , Anhui Conch Cement Company Limited(600585) .
When talking about the overall investment opportunity of A-share tiger year, a key word frequently mentioned by foreign institutions is “consumption upgrading”. Zhou wenqun believes that “the long-term growth trend of the consumer industry is relatively certain, and A-Shares may usher in the return of the value of the leading consumer. Last year, consumer stocks were affected by negative factors such as falling demand and rising raw material costs. There were phenomena such as declining performance growth and deep adjustment of valuation, which are expected to be significantly repaired this year.”
Lu Weiliang, deputy director of stock of Schroder investment Asia (excluding Japan), also said, “we expect that the recovery of Chinese consumption will be mainly led by Chinese demand, and high-quality consumer stocks are expected to benefit in the year of the tiger.”
“Hard technology” is also one of the priorities of foreign investment. Zhu Chaoping, global market strategist at Morgan asset management, said, “Science and technology hardware is an area that the state continues to support. Related industries have experienced a round of relatively sufficient adjustment in 2021, and it is expected to gain some room for growth on the basis of more reasonable valuation in 2022. We also continue to be optimistic about new energy and emerging industries related to carbon reduction. These industries are still in the early stage of growth, with relatively large growth space in the future, and are the main targets of long-term investment 。”
Fidelity International strategy report also pointed out that there are many investment opportunities in “specialized and special new” enterprises, such as Chinese companies in the field of parts manufacturing in the field of new energy vehicles, and companies with technological breakthroughs in the semiconductor industry under the theme of import substitution. In addition, Fidelity International is also optimistic about some leading enterprises in fragmented segments, such as waterproof, coating and construction industries, as well as chain hotels, chain pharmacies and chain catering.
“In the industry sector, the valuation of materials and healthcare stocks is particularly attractive, and the valuation of technology stocks is no longer too high. These areas are full of investment opportunities.” Luble added.
In addition, Schroeder investment has always been optimistic about ESG investment opportunities. “We expect new infrastructure and green investment to become key growth areas, which is consistent with the current policy direction. In addition, thanks to the increased financial policy support this year, traditional infrastructure investment may increase.” Lu Weiliang said.
