Against the background of growing interest in the Chinese market, over the past year, investments of global investors in Chinese assets grew by 40%, to $ 806 billion, which became a new record. Read what caused the growth of the Chinese market in my article!
Interest in Chinese markets continues to grow, despite disagreements between the US and Beijing on many issues, including corporate audits and China’s crackdown on the Uyghurs.
Over the year, foreign investors bought $ 35.3 billion worth of Chinese stocks through trading platforms that link Hong Kong to exchanges in Shanghai and Shenzhen. This is about 49% more than a year earlier. In addition, investors purchased over $ 75 billion in Chinese Treasury bonds, up 50% from a year earlier.
The influx of investors into Chinese markets has skyrocketed recently. According to the experts interviewed, this is due to the following reasons:
1) The country quickly recovered from the coronavirus pandemic;
2) Global indices began to include assets in yuan. One of the latest index providers to do so is FTSE Russell. In March 2021, he confirmed that he plans to add Chinese government debt to his FTSE World Government Bond Index (WGBI). The Japanese bank Nomura expects that this will bring the country more than $ 130 billion together, given that WGBI is followed by a large number of different funds with trillions of dollars in assets;
3) In recent months, there has been a global trend towards the transition from growth stocks (technology companies) to value stocks. According to analysts, the Chinese stock market provides ample opportunities for investment in sectors other than high technology;
4) In early July, Chinese regulators announced that they are introducing tough measures against Chinese companies listed on US exchanges. It also facilitated an influx of investors into yuan-denominated assets.
The attractiveness of China’s government bonds for foreign investors ensured a higher yield compared to the US government debt (a difference of 1.5%), as well as an appreciation of the yuan, which reached a three-year maximum against the US dollar in May.
The interest rate differential is also expected to continue to support the yuan, helping to boost capital inflows into Chinese equities and bonds in the second half of the year.
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