China Concept Shares, Hong Kong Shares A-shares rose together, and the RMB exchange rate rebounded - China's assets have strengthened collectively recently. Behind the rising asset prices, global funds are adding Chinese assets. "Foreign capital began to reallocate Chinese assets" "upgraded China's stock market rating to over allocation"... Recently, several foreign institutions such as UBS, Merrill Lynch and Bank of America clearly expressed their optimism for the Chinese market.
The positive transformation of the market stems from such factors as the improvement of overseas monetary environment, the prominence of China's asset price performance ratio, and the positive policy expectations. The industry believes that factors such as the profitability of Chinese enterprises and the enthusiastic repair of foreign capital allocation of "Chinese assets" are expected to continue to support the performance of Chinese assets.
Stock and bond market continued to gain positions
Foreign capital inflow resonance
In May, China's capital market rose significantly, especially Hong Kong stocks, which led the rise of major global indexes.
As of May 8, calculated by the Hang Seng Composite Index ("Hang Seng Composite Index"), Hong Kong shares have rebounded more than 20% from the intra year low in late January, far ahead of major regional stock markets in the world. By May 6, the Hang Seng Index had risen for 10 consecutive trading days, the longest consecutive rise since February 2018.
Behind the big rebound in the market represented by Hong Kong shares, the willingness of global funds to allocate Chinese assets has rebounded significantly. "Northbound funds swept away the decline of net outflows of 139.6 billion yuan in the third and fourth quarters of last year, and bought 68.2 billion yuan in the A-share market in the first quarter," said Meng Lei, China equity strategy analyst at UBS Securities. According to the survey of HSBC Holdings, more than 90% of emerging market funds began to increase their holdings in China's stock market.
The bond market resonates with the capital inflow of the stock market. According to the latest report of the International Institute of Finance (IIF), in March this year, China's stock market and bond market resumed net inflows of foreign capital for the first time since last June, including $1.7 billion in stock market inflows and $2.1 billion in bond market inflows. As of April this year, foreign investors had bought Chinese bonds net for seven consecutive months. Wang Chunying, deputy director of the State Administration of Foreign Exchange, said that in the first quarter of this year, foreign capital net increased its holdings of Chinese bonds by US $41.6 billion.
The RMB exchange rate also rebounded. Since May, the offshore RMB exchange rate against the US dollar has once recovered the 7.17 mark, which is more than 800 basis points higher than before the festival. Previously, in the strong storm of the US dollar in April, the RMB showed greater stability compared with other Asian currencies, and the fluctuation of the exchange rate was significantly less than that of major currencies such as the US dollar.
The policy direction and capital flow are intertwined
RMB assets regain favor
Recently, foreign capital accelerated its return of RMB assets, which was supported by various factors.
The improvement of overseas monetary environment is an important driver. Zhong Zhengsheng, chief economist of Ping An Securities, said that the expectation of the Federal Reserve to cut interest rates has picked up recently, and global risk appetite has warmed, driving capital flows to emerging market assets, including Chinese assets. Among them, the Chinese concept stocks and Hong Kong stocks in the United States that are more relevant to US dollar liquidity are more beneficial. The current valuation level of Chinese assets is relatively attractive, providing opportunities for international capital seeking value investment.
In addition, the positive signals of the new "National Nine Rules" and other policies were constantly released, which boosted the investment confidence of the market. "Policy expectations are beginning to unfold in the market, and the market action is ahead of the recovery of the fundamentals." The research report of China Galaxy Macro Research Team believes that the recent wave of growth in China's capital market has been affected by four key market expectations: the improvement of the overseas monetary environment has promoted the allocation of foreign capital to China's assets; The meeting of the Political Bureau of the Central Committee released positive policy signals; The expected liquidity improvement is significant; The real estate policy has returned to the situation of demand driven supply, and the relaxation of the real estate policy is expected to accelerate in the future.
China's assets still have great room for growth
The attraction is expected to grow day by day
A number of foreign-funded institutions have made clear that they are optimistic about China's capital market.
"At this stage, A-share has many advantages, such as low valuation, high marginal benefit of reform, and relatively wide investment opportunities, which deserves the attention of global asset allocators again." Huang Senwei, senior market strategist of Lianbo Fund, said that if international investors want to find a large market value The stock market with sufficient liquidity to hedge against the risk of inflation in the United States and the US dollar interest rate if it remains high, A-share is expected to become one of the key markets for risk diversification.
UBS Securities recently upgraded China's stock market rating to over allocation. Bank of America Merrill Lynch said in a report released on May 1 that in recent weeks, more and more overseas investment institutions have entered the Chinese market, especially Hong Kong stocks, which reveals a more complex logic of rising.
China's bond market also faces new opportunities. Lian Ping, president of Guangkai Chief Industrial Research Institute and chairman of the China Chief Economist Forum, believes that China's economy may grow by about 5.2% in 2024, driven by macro policies and the "troika", the attraction of China's bond market to international investors will grow day by day, and the allocation of RMB bonds, especially national debt, by foreign investors will maintain a rapid growth, This will become the main way and channel for overseas securities investment in China.
Looking ahead to the future, Zhong Zhengsheng said that factors such as the profitability of Chinese enterprises and the enthusiasm of foreign capital allocation to repair "Chinese assets" are expected to continue to support Chinese assets to achieve good performance.
The institution as a whole is optimistic and believes that under the resonance of a series of favorable factors, such as loose overseas monetary policy, continued inflow of foreign capital, and China's macroeconomic data exceeding expectations, The risk appetite of A-share market is expected to be boosted, and the main index may reach a higher level from the second quarter to the third quarter. （ Source: Shanghai Securities News ）
