Foreign capital inflows into China’s equity markets hit a record in 2021 with Kweichow Moutai and Contemporary Amperex among top stocks – News Couple

Foreign capital inflows into China’s equity markets hit a record in 2021 with Kweichow Moutai and Contemporary Amperex among top stocks

Foreign capital inflows into China’s stock markets hit a record high in 2021, as the country opened its financial markets further, as regulatory changes directed overseas investors to switch to mainland-listed stocks.

The net northbound capital flows into stocks listed on the Shanghai and Shenzhen Stock Exchanges, the two main exchanges on the mainland, hit a record high of 417.5 billion yuan (65.5 billion U.S. dollars), China International Capital Corporation (CICC) said in a report on Wednesday. As of December 23. .

The net volume of capital inflows nearly doubled from last year’s level, based on investment bank data.

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Record high inflows signify that foreign capital remains highly interested in assets in China, after the world’s second largest economy has bounced back from the impact of the pandemic and despite rising geopolitical tensions. However, risks remain, with valuations rising in many needed sectors amid concerns that tighter regulations could dampen investor appetite, analysts say.

CICC analyst Li Qiusuo said in a written response to questions from South China Morning Newspaper.

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“Since Chinese growth is expected to rise further, and with external growth facing downward pressures, the relative attractiveness of Chinese assets will rise,” he said. Li added that the deepening of capital market reforms in China and the possibility of Chinese stocks occupying a larger proportion in global investors’ portfolios reinforce this trend.

China’s gross domestic product accounted for 17.4 percent of the global total in 2020. The combined market value of its shares was 15.3 percent of the total held in 2020, and their share in the MSCI ACWI Leading Index was 3.6 percent of the total in 2021, according to CICC data.

China’s manufacturing sector has been increasingly favored by foreign investors in 2021, with more than half of net inflows going to companies in the field.

In the new energy sector, for example, foreign holdings made up 5.3 percent of total equity holdings in the sector, up from 1.9 percent in 2019. New energy was the second largest holding in 2021, with foreign investors snapping up. About 367 billion yuan of corporate stock in the supply chain.

Contemporary Amperex Technology, a manufacturer of lithium-ion batteries for electric vehicles and energy storage systems, ranked second among all Chinese stocks for foreign investors, jumping from ninth place in 2020.

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The jump in total net inflows was partly driven by a shift in investment preferences, with some foreign investors turning away from the new economy and technology companies due to Beijing’s sweeping regulatory crackdown on big tech and related sectors this year.

“Investors have been looking for Chinese stocks located in policy-supported sectors, such as new energy vehicles and upstream electrical appliance-related companies, which appear to be unique assets on the mainland,” said Alan Lee, portfolio manager at Atta Capital in Hong Kong. .

Consumer stocks remain the largest among foreign investors, reaching nearly 400 billion yuan and accounting for 14.5 percent of total foreign holdings. Liquor producer Kweichow Moutai maintained its number one seat as the stock of choice among foreign investors. Peer Wuliangye Yibin and Luzhou Laojiao also appeared on the list of the most-traded stocks in 2021, according to the CICC.

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Sinolink Securities has forecast that foreign capital will continue to flow into China A shares in the long term. However, Lee from Atta Capital told me that some risks remain in the short term. He said 2022 inflows may not exceed the level seen in 2021, as Beijing’s recent crackdown on “fake foreign investment” through equity peg schemes linking Hong Kong with Shanghai and Shenzhen may squeeze some capital in Chinese stocks.

Lee said the high valuations of dear foreign investors such as Kweichow Moutai and Contemporary Amperex, and any decline in favored sectors such as food and healthcare amid increased regulations, could hurt sentiment.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative audio report on China and Asia in over a century. For more SCMP stories, please explore the SCMP app or visit Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. all rights are save.

Copyright (c) 2021. South China Morning Post Publishers Ltd. all rights are save.

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