Foreign investors ‘seek shelter’ in undervalued Chinese assets, but scepticism remains

Analysts expect inflows into Chinese assets to persist as Beijing continues to implement easing measures

Reading Time:3 minutes

Why you can trust SCMP

06:57

Boom or bust: how sustainable is China’s stock frenzy?

Sylvia Main Hong KongandMia Nulimaimaitiin London

Published: 2:00pm, 4 Oct 2024Updated: 5:21pm, 4 Oct 2024

Chinese assets are witnessing fund inflows from foreign investors, driven by Beijing’s recent large-scale stimulus measures and efforts to mitigate potential risks from the pace of interest rate cuts by the US Federal Reserve and the escalating conflicts in the Middle East, analysts said.

With Chinese markets closed due to the ongoing “golden week” National Day holiday, a surge in Hong Kong stocks had been pushed by the influx of foreign capital, especially from passive index-based foreign institutions that have played an important role in the market liquidity, Huatai Securities said on Thursday.

And analysts expect the inflows to persist as Beijing continues to implement easing measures that would help lift expectations on potential returns on Chinese assets, which had been drastically undervalued.

Huatai Securities cited fund flow and asset allocation data provider EPFR that a net inflow of US$1.8 billion went into Chinese equity assets from passive index-based foreign investors between September 19 and 25.

The figure, while only covering the two trading days following the raft of rate cuts and policies unveiled last week to boost the world’s second-largest economy, marked a notable increase compared to previous levels.

Gary Ng, a senior economist at French investment bank Natixis, said the inflow of foreign capital had been partly driven by the US Federal Reserve’s rate cut, which boosted risk appetite and benefited all assets in emerging markets, including China.