Driven by multiple positive factors, A-Shares and Hong Kong shares changed their decline and rebounded sharply for two consecutive days on March 16 and 17. Northward capital also ended the net outflow for eight consecutive days, with a net inflow of more than 5 billion yuan on March 17.
At present, what is the view of foreign capital on the Chinese market? A number of foreign-funded institutions said that overseas funds did not withdraw from the A-share market as rumored in the market, but gradually increased their holdings and oversupplied to the Chinese market. At present, the A-share market has become attractive. We have observed some positive policy signals and can be more optimistic in the future.
JPMorgan Chase: large emerging market funds are gradually increasing their holdings of Chinese assets
JPMorgan's recent attitude towards Internet services has attracted attention from all walks of life.
Liu Mingdi, chief strategist for Asia and China equities of JPMorgan Chase, said that since October 2021, JPMorgan Chase has held the view of "low allocation" to the Internet industry in its China stock simulation warehouse. "This is mainly due to regulatory considerations. The meticulous and cautious degree of China's regulation is making rapid progress, so we don't think China's regulation of the Internet industry will be relaxed in 2022."
The general law of an industry with network effect and scale effect is that an industry grows from scratch, from small to large, from large to trigger supervision, and enters a steady state after supervision. However, she said that this was not inconsistent with JPMorgan's overall "over allocation" rating of A-Shares and Hong Kong stocks.
JPMorgan's stock strategy divides the industry into several categories: old giants (such as real estate), new giants (such as the leader of green economy and digital economy ecological track), and regulated giants (such as the Internet). Therefore, after some industries mature, new growth industries will stand out. At present, the over allocation of A-Shares and Hong Kong shares is maintained in the simulation position, the valuation is underestimated compared with the historical average, and the signals of performance and growth are quite clear.
Overweight: it, industry, materials, energy, optional consumption (clear performance growth); Standard sector (neutral): finance and real estate (industry integration is already in progress); Underweight: communication services, medical and health care (the valuation is too expensive).
"According to the 58 global large emerging market funds tracked by JPMorgan Chase through third-party data, by the end of January 2022, the proportion of low allocation funds in China had decreased to 17% and the proportion in the fourth quarter of 2021 was about 37-45%, indicating that large emerging market funds are gradually increasing their holdings of Chinese assets." Liu Mingdi said.
According to the fund flow data of third-party global funds and buyer institutions tracked by JPMorgan Chase, in the first five weeks as of March 4 (including February), the capital inflow of passive funds into Hong Kong and mainland stock markets was US $2.3 billion, and the capital inflow of active funds in the same period was us $14 million. During the week from February 28 to March 4, passive funds showed a net inflow and active funds showed a net outflow. Since then, active funds continued to show a net outflow of funds in the second and third weeks of March. The geopolitical risks that have occurred have triggered concerns about potential geopolitical risks and clearly triggered capital outflows. Nevertheless, in the same period, passive funds maintained the trend of net capital inflow.
On whether the rebound in China's stock market will continue, Liu mingdy said that the main factors considered by international investors include: international geopolitical conflicts and China US relations; The situation of Omicron epidemic in the mainland and the arrangement of taking into account the stable operation of the economy; The trend of macroeconomic growth and performance growth; Trends in industry regulation.
"The Chinese market is the most promising market in a series of 2022 strategic prospects published by JPMorgan at the end of 2021, including global asset allocation suggestions and emerging market stock market prospects." Liu mingdy stressed.
Goldman Sachs: oversupply China market
Goldman Sachs report shows that based on good growth targets, loose policies, extremely low valuations and low investor positions, it still remains "over matched with the Chinese market".
Goldman Sachs said that at present, the Chinese market is oversold, and the fair P / E ratio of MSCI China should be 12.5 times, rather than the current 9.9 times, which is the lowest in six years.
The report points out that MSCI China's stock risk premium (ERP) is 9.5%, 0.9 standard deviation higher than the long-term average, close to or even higher than the high point during the outbreak of covid-19 pneumonia in early 2020 and the selling of A-share market in late 2018 and 2015. "The rise of ERP reflects the widespread concerns of investors, such as the spillover effect of geopolitical risks, the delisting risk of zhonggai shares, and the investability of Chinese assets.".
Goldman Sachs lowered the 12-month forward P / E ratio of MSCI China Index from 14.5 times to 12 times, but in terms of specific points, it still means that there is an upward potential of 27%. The sectors favored by the agency include: themes supported by Chinese policies, such as new infrastructure and social equity, individual stocks repurchased, and some sectors with deep discounts in valuation.
Morgan Stanley: maintain standard allocation of Chinese shares
Morgan Stanley said that the voice of the meeting of the financial stability and Development Committee of the State Council mentioned the issues of greatest concern to the market, which is a positive sign.
"We take a positive view of these statements and note that the Hang Seng Index has rebounded sharply above our target level of 19500 under our pessimistic scenario assumption, and A-Shares have also risen. It will still be a long way for the index to return to our target level under our basic scenario assumption, but the path is clearer than ever." Morgan Stanley China equity strategist Wang Ying pointed out.
The agency currently maintains the standard configuration of China's stock market and believes that the rebound may be more sustained if there are the following further trends.
First, the adjustment of covid-19 policy; Second, if the global geopolitical tension improves, it will help China's ERP (stock risk premium) decline; Third, the real estate market is more stable; Fourth, more coordination in policy implementation between different government functions; Fifth, revitalize the offshore IPO market and rebuild investors' confidence in the growing, high-quality and investable offshore stock market.
UBS Securities: positive policy signals observed
On March 16, the financial stability and Development Commission of the State Council held a special meeting to convey important information and boost market sentiment. In UBS's view, the specific implementation of the above policy signals will dominate the market trend and foreign trading behavior in the short term. What positive factors are expected to further alleviate the concerns of overseas investors?
UBS believes that if China and the United States can reach a cooperation agreement on cross-border audit supervision, the trend of stock ownership in the withdrawal of foreign capital is expected to be reversed; If the regulation of the Internet, medicine and other industries is significantly relaxed, or the relevant regulatory authorities clarify the boundary of their regulation, or even actively introduce policies beneficial to the market, the risk premium of the stock market will be significantly reduced with the elimination of uncertainty; The introduction of stronger monetary policy easing, including further reduction of reserve requirements and interest rates, and strengthening the support for the real estate industry will help investors confirm the decision-making level's determination to relax macro policies to stabilize economic growth.
"Overall, we have observed positive policy signals, and the further implementation of supporting policies is expected to attract overseas investors to return to the A-share market." UBS pointed out.
Allianz Investment: China's stock market will usher in a more favorable environment
Allianz investment believes that China's fiscal and monetary policies have turned to steady growth. "China has taken measures to increase government expenditure, and the government has repeatedly stressed the importance of maintaining stability this year."
The stock market policy environment tends to be favorable, but the relevant risk factors also deserve attention. For example, the epidemic may cause uncertainty to the economy.
Allianz investment pointed out that in order to seize the benefits of the government's easing of monetary policy and increasing financial support, investors may consider adjusting the allocation of China's stock market to stock markets and industries that are expected to benefit. In the A-share market, wealth management is expected to benefit from the investment opportunities brought by the increase of family wealth and the growth of financial investment demand. There are also investment opportunities in the long-term trend towards healthy living and new technologies, including augmented reality and virtual reality technologies and semiconductor supply chains.
Considering that China's financial environment may become loose and the valuation has declined, Allianz investment believes that China's stock market will usher in a more favorable environment in 2022
Foreign capital: optimistic about China's economy and RMB assets, and there is no change in the demand for A-share allocation
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