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Overseas investors’ appetite for Chinese stocks continues to recover after second month of buying in March

  • A shift in stance by foreign investors is ‘a positive signal for Chinese stocks’: analyst
  • Sentiment is shifting and portfolio allocations to China are rising, HSBC strategist says

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An electronic ticker displays stock figures in Shanghai’s Lujiazui financial district. Overseas investors continue to raise their holdings in banks and food and beverage makers, while cutting exposure to computer-linked stocks. Photo: Bloomberg
Zhang Shidongin Shanghai

Global fund managers have increased their exposure to Chinese yuan-traded stocks for a second month in March, indicating that foreign appetite for these shares is recovering.

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Overseas investors bought a total of 22 billion yuan (US$3 billion) of onshore shares for the month through the Stock Connect programmes with Hong Kong, according to Bloomberg data. That followed net purchases of 60.7 billion yuan in February and a record exodus over the previous six months. For the first quarter, overseas buying amounted to 68.2 billion yuan, the data shows.
The return of foreign inflows is an indication that the worst of a three-year decline in Chinese stocks is probably already over, as Wu Qing, the newly appointed chairman of the China Securities Regulatory Commission (CSRC), has taken a slew of steps to revive investor confidence. These include calls for more dividend issuances and buy-backs by listed companies, further curbs on stake reductions by key shareholders and a higher bar for new listings.

“We’ve seen a shift in stance by foreign investors and that’s a positive signal for Chinese stocks,” said Dong Zhongyun, an analyst at Avic Securities. “It’s worthwhile watching the flows of northbound investment [through the Stock Connects], as that’s where fresh capital comes from, and it might sway the market.”

Overseas investors continued to raise their holdings in banks and food and beverage makers, while cutting exposure to computer-linked stocks, Sinolink Securities said without providing any specific names.

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Offshore hedge funds and foreign long-only funds have led the inflows since late January, although it remains to be seen whether the return is tactical or strategic, HSBC Holdings said in a report this month. More overseas buying is expected going forward, because of battered valuations, light positioning in Chinese equities and the prospects of more stimulus policies, it said.

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