At the beginning of 2022, with the cloudy European and American markets, more and more overseas investors began to pour into the Chinese market. Chinese assets are being regarded by foreign capital as a safe haven from a series of challenges such as inflation, economic growth and epidemic!
Although last year’s returns were more or less eroded by regulatory policies, the latest groups of phenomena show that global fund managers are still confident, injecting funds into Chinese stocks and bonds, betting on China’s commitment to sustained stability, monetary and fiscal easing and more moderate inflation compared with other economies, We believe that these favorable factors can help protect them from other market fluctuations.
The most intuitive evidence of this bullish sentiment is the overseas funds flowing into China’s stock market through land stock connect. according to Morgan Stanley, in the first three weeks of 2022, the net inflow of foreign capital into Chinese stocks through the land stock connect program reached an average daily of $413 million, a record high.
On Wednesday, although the Federal Reserve is about to hold an interest rate meeting at night to discuss the plan of raising interest rates and shrinking the table, the Chinese market has not been too negatively affected by overseas policies. The three major A-share indexes generally rebounded, and the gem index rose nearly 1%.
As of Wednesday’s closing, northbound funds had net purchases of 1.139 billion yuan of A-Shares throughout the day, including 161 million yuan of net sales of Shanghai Stock connect and 1.301 billion yuan of net purchases of Shenzhen Stock connect; In the afternoon, the net purchase amount of funds from Shanghai and Shenzhen North was nearly 3 billion yuan.
At present, strong foreign capital inflows have pushed the RMB exchange rate against the US dollar to its highest level in nearly four years this week. There is no doubt that this is particularly special in the context of the current policy differences between China and the United States.
David Dali, head of portfolio strategy at Matthews Asia, said China was “the most popular country” among the about 30 investable emerging stock markets in 2022.
“we believe that China’s valuation is one of the least risky and most attractive of all major markets,” Dali said.
He also cited a series of factors, including less regulatory resistance, the government’s preparation to stimulate the economy, and the official statement on maintaining policy stability this year.
overseas institutions are optimistic about the Chinese market
These positive developments in the Chinese market are in sharp contrast to those in the rest of the world: the world’s major central banks are preparing to withdraw the excessive stimulus measures taken over the past few years, especially as the Federal Reserve is accelerating the process of monetary tightening to curb runaway inflation, which may weaken stock value and earnings.
In fact, domestic and foreign institutions that are optimistic about the Chinese market have sprung up one after another. Fidelity International also believes that China’s stock market is attractive from a global perspective.
“China’s policy shift is very obvious. Recent data show that China’s economy has stabilized.” Zhou wenqun, fund manager of Fidelity China, said.
Under the background of the widening divergence of monetary policy between China and the United States, bond investors are also being attracted by the Chinese market. “In the interest rate hike cycle, the bond market usually performs poorly, but in China, we see that the monetary policy easing cycle has just begun,” said Paula Chan, senior portfolio manager of Manulife investment management. She also pointed out that China’s inflation concerns are not as worrying as other countries, and Chinese bonds are also a good hedge.
mark Mobius, the father of emerging markets and founder of Mobius capital partners, also believes that the China Hong Kong stock market can recover and believes that the China Hong Kong stock market will rebound in 2022.
In an exclusive interview with Hong Kong Economic Daily, Mai Pusi believed that China’s regulation should break the market monopoly and introduce competition, which is a good way to support small and medium-sized enterprises. In the long run, the practice of regulators is beneficial to the development of the Chinese market. China is one of the world’s largest economies, and it is unreasonable for investors to avoid investing in China. He said that many companies have done well in China. There are a lot of investment opportunities in the Chinese market. More importantly, China has always welcomed foreign investment.
In addition, Lucy Liu, global emerging market equity portfolio manager of BlackRock, recently pointed out that “China’s economic growth may exceed people’s expectations. There are signs of bottom rebound in the Internet industry. Now is a good time to build positions in Chinese stocks.”
A shares are expected to lead emerging markets to counter attack?
According to the data of capital flow monitoring agency EPFR quoted by Bank of America on Friday, emerging markets had the largest weekly capital inflow since March 2021, reaching US $5.2 billion, and China’s stock market also had a large amount of capital inflow; The US stock market saw its first capital outflow in four weeks.
For a time, the capital flow of the global market from west to East and from developed markets to emerging markets seems to be emerging. China, the world’s largest emerging economy, is undoubtedly expected to stand out and even lead the counter attack of emerging markets
According to a set of data listed by Bloomberg earlier this week, despite the threat that the Federal Reserve has a high probability of raising interest rates within the year and the rapid spread of Omicron virus around the world, the MSCI Emerging Markets Index has overcome these challenges and rose sharply by 3.6% in the past month. At the same time, although the S & P 500 index has fluctuated in a similar range in the past month, it is in the opposite direction of emerging markets
“We increased our holdings of emerging market stocks last November,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management in London, “The Fed’s rate hike this year may exceed current market expectations. In contrast, the central banks of several emerging market countries have tightened their policies and may even turn back to stimulus in the near future.”
Goldman Sachs asset management also pointed out that the record low interest rates in the past 10 years have helped promote the profit growth and stock price rise of American enterprises, but given that the Federal Reserve will raise interest rates this year, it may be time to diversify investment.
It is worth mentioning that valuation factors are also conducive to emerging market stocks. Data show that even after its recent excellent performance, the price earnings ratio of the MSCI Emerging Markets Index is still about 40% lower than that of the S & P 500 index, close to the biggest gap since 2007. The MSCI Emerging Markets Index is based on an estimated P / E ratio of about 12.4 times over the next 12 months, while the S & P 500 index is much higher, about 20 times.
Kiran Nandra, head of emerging markets equities at Pictet assets in London, said, ” the Chinese market has lagged behind other emerging markets, but we expect investors’ interest in China to rise rapidly now. after the central bank cut the deposit reserve ratio and overnight interest rate, we have seen preliminary signs of looser monetary policy. Of course, it is important to choose the right areas to layout.”
as for what is the right field? From the investment layout since the beginning of the year, the sweet pastry in the eyes of foreign investors seems to have gradually surfaced.
Morgan Stanley said that at the beginning of this year, foreign buyers were mainly concentrated in the fields of banks, materials and capital goods, including China Merchants Bank Co.Ltd(600036) , Nari Technology Co.Ltd(600406) and Ping An Insurance (Group) Company Of China Ltd(601318) . UBS Securities said that both foreign investors and Chinese mutual funds allocated funds to what they thought were hot topics, mainly new energy and manufacturing.
