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.
In less than three weeks of the new year, foreign investors have bought a net 103.6 billion yuan 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 in net buying in all of 2022, the lowest since 2017.
The flows have pushed the benchmark CSI 300 Index 000300 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. 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 160462 recorded the worst-ever five-day losing streak with a weekly loss of 8.