“China is safe this year!They’re getting more optimistic…”


International investors are putting more money into Chinese stocks, CNBC reported On Feb. 16.Chinese equity funds saw net inflows of $16.6 billion in January, the fourth time monthly inflows have exceeded $10 billion since the pandemic, according to GLOBAL Emerging Markets Equity Fund Research.The data showed a net inflow of nearly $11 billion in December.”Investor interest in China actually increased in the fourth quarter of last year,” Cameron Brandt, head of research at Global Emerging Markets Equity Fund Research, said in a telephone interview last week.I think the driver is a perception, particularly among institutional investors, that in the emerging markets sector, China is safe for a variety of reasons this year.”Mr. Brandt said the latest wave of buying came from institutional investors, not retail investors.Divergent interest has emerged as global investment firms have become increasingly bullish on Chinese stocks in the past few months.China has also become “a good contrarian investment” this year, as the local market is entering a period of stimulus and easing and the Federal Reserve has begun a tightening cycle, said Xu Chung-cheung, chairman and chief investment officer of Hong Kong’s Ruilian Financial Intelligence LTD.So bullish are Goldman Sachs and Bernstein that in the past few weeks they have both issued lengthy reports recommending Chinese stocks, also known as A-shares.”We believe China’s $14 trillion A-share market has become more investable given the ongoing reform measures in China’s capital markets,” Goldman Sachs Chief China equity strategist Jinjin Liu and his team said in an 89-page report Sunday.In A sign of the market’s maturity, index giant msci decided to include China a-shares in its benchmark MSCI Emerging Markets currency index in 2018.The move forced international funds that track the index to increase their holdings of A-shares.But retail investors have so far dominated the mainland market.Sheng Nan, global multi-asset strategist at Morgan Asset Management, said in a telephone interview on Thursday that weak onshore market sentiment and better opportunities in developed markets since the beginning of last year have led the firm to take a neutral view on Chinese equities.Sentiment could also improve if growth improves in the second quarter, she said.”We actually want to be more optimistic about The Chinese stock market,” she notes.The Shanghai Composite is up about 3 per cent since February after a week-long holiday for the Lunar New Year.As analysts assess the performance of Chinese stocks, the country’s markets offer a growing number of business opportunities for international investment firms.Finance is one of several areas where restrictions have been eased in the past few years.Policy changes have enabled firms such as BlackRock, Goldman Sachs and UBS to buy full control of their local securities or mutual fund operations.”One of the reasons we’re bullish on China is because we’re working in areas where China is really opening up in a big way,” said Brendan Ahern, chief investment officer of The Us fund.”In general, I think there is a difference of opinion between Chinese and foreign investors,” Mr Ahern said.Foreign investors generally “like to buy China for growth,” as opposed to banks and other industries with many state-owned enterprises, said Wu Yi, China equity strategist at Bank of America Securities.”Our overall view is that China has not been an easy bull market this year,” she said.It is more likely to buy on hope and sell on facts and results.”

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