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The rotation back to Chinese stocks was expected to be “stronger” after two consecutive months of net buying by global long-only funds, analysts led by Laura Wang at the US investment bank said in a report on Friday.
Long-only funds poured US$2.7 billion into Chinese stocks in July, accelerating from a net inflow of US$1.2 billion in June, the report said. That came despite holdings reductions by some large actively managed mutual funds focused on Asia excluding Japan, it said.
Shunned over the past few years, Chinese stocks are now back on the radar for global investors after trade tensions between Beijing and Washington de-escalated and the mainland’s first-half economic growth exceeded estimates. Hong Kong’s Hang Seng Index has gained 24 per cent this year, and the CSI 300 Index of mainland-listed shares has added almost 5 per cent.
“China, with the second-best earnings revision breadth trend and a more fair valuation compared to other markets, should once again attract additional fund flows,” Wang said. “As we approach the Fed rate cut schedule and a higher consensus towards a weaker US dollar, global investors’ willingness to allocate into non-US markets should also pick up.”
The bank’s assessment dovetails with China’s official data on foreign buying. Overseas investors bought a combined US$10.1 billion of onshore stocks and mutual funds in the first half, starting to reverse the flight over the past two years, the foreign-exchange regulator said last month.
