China’s equity benchmark is closing in on a bull market as foreign investors rush to buy local shares on bets that the nation’s economic reopening and supportive policies will accelerate the market’s rebound.
(Bloomberg) — China’s equity benchmark is closing in on a bull market as foreign investors rush to buy local shares on bets that the nation’s economic reopening and supportive policies will accelerate the market’s rebound.
The CSI 300 Index rose 0.5% as of the midday break in Shanghai on Friday, the last trading session before weeklong Lunar New Year holidays. The gauge has surged 19% from an Oct. 31 low, led by consumer stocks and financials, as investors anticipate an outburst of retail spending and improved business environment following President Xi Jinping’s moves to exit Covid Zero and focus on growth.
Everyone from Wall Street strategists to global money managers and even some sovereign wealth funds are increasingly turning bullish as economists upgrade their forecasts for China’s expansion this year. A return of overseas buyers is supercharging mainland shares after they lagged their Hong Kong-listed peers in the reopening rally that began in November.
“Foreign investors are really materially underweight China equities, and this is material, because we don’t have to worry about investors selling the rally,” George Efstathopoulos, a portfolio manager at Fidelity International, said in an interview. “We think earnings bottomed out last quarter.”
Global funds were net buyers of shares listed in Shanghai and Shenzhen for a 13th straight day on Friday, the longest purchasing streak since May 2020. They have raised their holdings by 110 billion yuan ($16.2 billion) in January, on pace for a monthly record, according to data compiled by Bloomberg.
The bullish backdrop heading into the year of the rabbit is a far cry from 12 months back. Chinese stocks were suffering at this point in 2022 — with the CSI 300 staring at a bear market — as they got battered along with other markets amid fears over US rate hikes.
China’s economy will rebound to its pre-pandemic growth trend this year as virus infections have passed their peak, Vice Premier Liu He said at the World Economic Forum’s annual meeting this week. Recent data showed the economy was more resilient at the end of 2022 when a virus wave swept the nation.
Sentiment is also getting a boost from a series of property support measures. The latest report showed the nation’s financial regulator and bad-debt managers are beefing up refinancing support for high-quality developers.
The CSI gauge is up 7.9% so far in 2023 after capping its first back-to-back annual losses since 2011 last year. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong — which suffered more during the relentless equity selloff — has rebounded faster and entered a bull market in November. That measure is up almost 11% this year.
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