Sing long and do long Foreign investment in China is full of confidence

Recently, a number of international institutions such as JPMorgan Chase, Citi and UBS have raised their forecasts for China's economic growth throughout this year. Institutional sources said that whether from the perspective of China's economic growth prospects or the reasonable valuation, there are investment opportunities in the Chinese market that cannot be ignored by global investors. Foreign capital is both "singing long" and long on Chinese assets, conveying sufficient confidence in increasing investment in China.

Upgraded the rating of Chinese stocks

"Recently, we once again upgraded our Chinese equity rating to moderately overweight." BlackRock said a few days ago.

In the recently released 2022 fund annual report, BlackRock China New Vision Hybrid Fund Manager believes that in the future, with the disclosure of financial results, coupled with the clarity of relevant policies and the gradual clarity of economic recovery prospects, the Chinese market is expected to gradually return to a boom-driven and fundamental-driven situation.

In addition to BlackRock, not long ago, Goldman Sachs, Morgan Stanley and other international banks have raised the target price of the MSCI China Index, releasing a positive signal of bullishism on the Chinese stock market.

The "long" of foreign institutions on A-shares can also be seen from the recent 2022 annual reports and 2023 quarterly reports of listed companies. A number of foreign institutions, including Morgan Stanley, Norges Bank, Abu Dhabi Investment Bureau, etc., appeared in the list of the top ten circulating shareholders of listed companies.

"There is still room for improvement in the allocation of foreign capital to China's stock market, which will continue to support the upside of China's stock market on a technical level." Huang Liang, senior strategist of China Merchants Fund, said that in addition, the stabilization and recovery of the economy will also promote the upward movement of China's stock market, transforming from the previous valuation revision to the improvement of profit expectations.

"Real money" to go long China

China's economic data in the first quarter exceeded expectations, and many international institutions once again raised their forecasts for China's economic growth for the whole year. JPMorgan raised its 2023 growth forecast for China to 6.6 percent from 4 percent previously. Citi raised its 2023 growth forecast for China to 5.7 percent from 6.1 percent previously. UBS raised its forecast for China's GDP growth in 2023 to 5.4% from 5.7% previously.

Economic growth is expected to be good, and foreign capital is also "real money" to long China. As of April 4, the amount of northbound funds "sweeped" this year, which is regarded as an "investment vane", has exceeded 26 billion yuan, more than double the scale of inflows in the whole of last year.

According to the latest data from the State Administration of Foreign Exchange, in recent months, with the improvement of the internal and external environment, foreign investment in China's securities has generally improved. Net foreign purchases of onshore stocks hit a record high in January, and the balance of onshore bonds held by foreign investors rebounded month-on-month in March.

"China's economy has recovered steadily, market expectations have been boosted, and the enthusiasm of foreign investors for investing in RMB assets has rebounded significantly." Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said at a press conference held by the State Council's new office a few days ago that RMB assets have the characteristics of stable comprehensive returns, high investment value, and strong demand for diversified allocation, and it is expected that foreign investors will still steadily invest in China's securities market in the future.

In addition, the attractiveness of Chinese assets stems from a more reasonable valuation level. "China's domestic equity valuations are low and the investment outlook is good. Whether from the perspective of indicators such as price-earnings ratio or price-to-book ratio, the current valuation of A-shares is relatively low, so the investment value is relatively high, and the potential risk is relatively low. Wang Chunying said.

Zhou Wenqun, deputy director of the equity department of Fidelity Fund, and other experts believe that policy support has given foreign investment in Chinese assets a "reassuring pill". In terms of monetary and fiscal policies, China still has more policy tools to use, and there are many opportunities for individual stocks with excess returns in China's stock market.

Attract more "long money" into the market

In addition to increasing their holdings of Chinese assets, international institutions optimistic about China's opportunities have also chosen to increase their presence in China and expand their investment in China.

Since the beginning of this year, a number of wholly foreign-owned public offerings such as Schroders Fund and AllianceBernstein Fund have been approved; Allianz Investors, a subsidiary of Allianz Insurance Group, has submitted an application for approval of the qualification of public fund manager; Fidelity's first public fund was officially established and completed on April 4.

The China Securities Regulatory Commission (CSRC) recently approved Warburg Pincus Asia Pacific Asset Management Limited as a shareholder of CEIBS Fund holding more than 5%. "Warburg Pincus is firmly optimistic about the development prospects of China's public fund industry and will continue to contribute to the high-quality development of China's asset management industry." Warburg Pincus said that with the steady accumulation of wealth of Chinese residents and the continuous development of China's capital market, structural opportunities on the demand side and asset supply side of residents are rapidly emerging, and China's asset management industry is ushering in a new era of high-quality and high-speed development.

A number of foreign-funded institutions have deeply experienced that the attractiveness of the A-share market under the nourishment of institutional opening up is constantly increasing, and the general trend of foreign capital increasing the allocation of A-shares remains unchanged. As some foreign chambers of commerce and global management consulting companies surveyed, as China's economy recovers, foreign investment confidence in China has been further enhanced, and they are more optimistic about China's economic development prospects, and foreign investment will still steadily invest in the Chinese market in the future.

China's capital market will attract more "long money" to enter the market. "As China's economy continues to recover in the future, there will be a part of the long-term net inflow of foreign capital into the A-share market, and the net inflow of northbound funds is expected to reach more than 3000 billion yuan this year." Meng Lei, a China equity strategist at UBS Securities, said.

Chen Li, an analyst at Soochow Securities, believes that China's economic recovery has made overseas capital reallocate Chinese assets. The influx of funds this time is no longer just hedge funds, but also includes some long-term funds such as public offerings and sovereign funds.