Market Extra: Foreign investors flock back to Chinese stocks now economy is reopening after lifting of Covid restrictions

by | Jan 19, 2023 | Stock Market

Global funds are marching back into Chinese equities in full force as the country’s rapid reopening after lifting COVID restrictions and the likelihood of policy stimulus to rescue economic growth have improved the gloomy backdrop for stocks in 2023.  Coronavirus Update: China slams Western media for criticism of zero-COVID, as U.S. cases continue to decline

In less than three weeks of the new year, foreign investors have bought a net 103.6 billion yuan ($15.3 billion) of Chinese stocks via the trading link between Hong Kong and the mainland, according to data compiled by MarketWatch. The purchases have exceeded a total of 90 billion yuan ($13 billion) in net buying in all of 2022, the lowest since 2017.  As of Thursday, offshore investors added about 8 billion yuan ($1.2 billion) in Contemporary Amperex Technology Co. Limited
the world’s largest producer of lithium-ion batteries and the battery supplier of Tesla Inc.
They also bought a net 7.6 billion yuan ($1.1 billion) in Ping An Insurance Group Co.
and a similar amount in spirit maker Kweichow Moutai Co.
according to MarketWatch calculations of Hong Kong Exchanges data. The flows have pushed the benchmark CSI 300 Index
to its highest level in almost five months and rallied over 18% from its October low. The CSI 300 benchmark rose 7.3% so far this year, according to Dow Jones Market Data.  These purchases add to growing optimism that foreign investors still remain bullish in the country’s economy despite low growth in 2022. On Monday, China reported 3% GDP growth for the full year of 2022, the second slowest growth rate it has seen since 1976.  Investor sentiment has changed drastically since the China’s Communist Party Congress which concluded in October. Pessimism about Chinese equities peaked when China’s leader Xi Jinping secured a groundbreaking third leadership term and introduced a new Politburo Standing Committee which was seen by many as a formal ending of the pro-economic-growth reform era. Hong Kong’s Hang Seng China Enterprises Index
recorded the worst-ever five-day losing streak with a weekly loss of 8.9% in the week of Oct. 24, while CSI 300 Index capped that week with a loss of 5.4%, the worst since July 2021.  See: Why investors are fleeing Chinese assets as Xi tightens grip on power Also: What China’s reopening means for markets, according to Goldman Sachs However, sentiment has been buoyed by a sudden shift in the country’s zero-COVID policies in December, followed by the official reopening of its border in early January.  Economists and market analysts expect …

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