Overseas investors increase their allocation to China's stock market -- international institutions cast a "vote of confidence" on the Chinese market

Recently, many international investment institutions, including Morgan Stanley and Goldman Sachs, have been "bullish" on China's stock market, and many institutions have taken out "real gold and silver" to buy more Chinese assets.
Experts said that with the implementation of a series of stable growth measures in China and the accelerated optimization of epidemic prevention and control measures, the expectation of China's economic stabilization and rebound has become clearer, attracting international institutions to re-examine the allocation value of China's assets. In the future, under the background of China's in-depth promotion of high-level institutional opening up of the capital market, the "buy buy" efforts of international institutions are worth looking forward to.
The agency raised its expectation
Recently, many overseas investment institutions have increased their allocation to China's stock market.
On December 4, Morgan Stanley raised China's stock market from "standard allocation" to "over allocation". It is estimated that MSCI China Index will rise by 14% by the end of 2023. Wang Ying, chief equity strategist of Morgan Stanley China, said that the evaluation framework showed that the risk premium of stocks might be improved due to the continuous optimization of China's epidemic prevention and control measures, the stabilization of the real estate market, and the regulatory adjustment entering the final stage. Therefore, the target price of the entire Chinese market was raised, and there would be greater opportunities for revaluation by 2023.
Coincidentally, on November 30, Goldman Sachs also said that it would also give a "high allocation" proposal for A-share investment in 2023, and expected that A-share valuation would rise significantly. Liu Jinjin, chief China stock strategist of Goldman Sachs, said that he was optimistic about the performance of Chinese stocks listed at home and abroad under the expectation that macro-control efforts would increase and GDP growth would rise.
The strategy team of Bank of America believes that China's domestic stocks will rise due to the excess savings of Chinese residents and the continuous optimization of epidemic prevention policies. Rui Dalio, founder of Bridgewater Fund, believes that at present, some valuable assets can be found in the Chinese market. China is the second largest economy in the world, and investors can improve their diversified investment by investing in China.
The support of international institutions is not groundless. Recently, China's ETFs, Chinese stocks and offshore RMB exchange rates listed overseas have all witnessed a steady rise, enhancing the confidence of foreign institutions to invest in China. For example, since November, the net value of iShares MSCI China ETFs with a scale of more than US $7 billion has risen by more than 30%; The NASDAQ Golden Dragon China Index rose by more than 40% in November, the largest monthly increase since records began in 2003; The RMB exchange rate has also risen strongly recently. In the morning of December 5, the offshore RMB exchange rate against the US dollar rose to 6.9813, a new high since mid September.
"At present, some major economies continue to tighten monetary policies, with increased risks of economic recession and reduced expectations of market returns. In contrast, China's economic development is stable and investment logic is clear." Li Zhan, chief economist of China Merchants Fund Research Department, analyzed that China's economy is changing from high-speed growth to high-quality development, and there are a lot of investment opportunities in the process of industrial upgrading and consumption upgrading in various industries. At the same time, China recovered quickly from the impact of the epidemic, its economy rebounded significantly in the third quarter, and its position in the global industrial chain was rising day by day. In addition, China's financial opening to the outside world continued to advance, and the channels for foreign investors to participate in the domestic financial market continued to optimize, attracting more and more international investors' attention.
The attraction of A-share increased
In addition to the high-profile "singing more" of Chinese assets, foreign investors also took out "real gold and silver" and continued to significantly increase their positions in A-shares. As of December 6, the net purchase amount of northbound funds in 30 days had exceeded 75 billion yuan, and the net purchase amount in the past 10 days had reached 42.8 billion yuan.
Looking forward to 2023, the market expects that the pace of foreign investment "buying and buying" will continue to accelerate. "In 2022, nearly 70% of the financing amount of the A-share market will come from the Science and Technology Innovation Board and the Growth Enterprise Market, which fully reflects the support of the capital market for scientific and technological innovation enterprises and emerging industries." Sun Jin, partner of PwC China Comprehensive Business Service Department, said that in 2023, with the steady progress of the reform of the comprehensive registration system and the introduction of more measures to support scientific and technological innovation, the international appeal of the A-share market will be further enhanced.
Specifically for the investment industry, Goldman Sachs strategy team believes that with the implementation of stable growth policies and measures and the continuous optimization of epidemic prevention and control measures, China's unemployment rate will decline, labor income will improve, consumer confidence will be restored, and consumer services, medical equipment and services will rebound strongly, especially in the tourism, catering, entertainment and aviation industries.
"Next, the geopolitical situation will enter a relatively calm stage, and the equity cost and equity risk premium will gradually decline, which will help investors to reinvest in the Chinese stock market. The consumer sector is the beneficiary of economic openness, so we further increase our exposure to this sector, and continue to recommend increasing the allocation of offshore Chinese stocks." Wang Ying said.
In order to better attract foreign capital into the Chinese market, Tian Lihui, Dean of the Financial Development Research Institute of Nankai University, believes that we should adhere to promoting the high-level institutional opening of the capital market, and coordinate development and security. We should continue to expand the quota of connectivity, increase the variety of international products, gradually loosen the restrictions on the proportion of foreign shares in financial institutions, and continue to promote the internationalization of the RMB. At the same time, the capital market should be open to the outside world with a gate, and there should be room in the trading rules. The market supervision should be real-time and prudent to prevent foreign hot money speculation and the spread of foreign financial risks.
Fang Xinghai, vice chairman of the CSRC, also said recently that high-quality overseas capital market institutions are welcome to invest in China. In the future, we will further improve the institutional framework for opening the capital market to the outside world, accelerate the implementation of various opening measures, and attract and gather more outstanding international institutions and talents to participate in China's capital market. It will also continue to improve relevant institutional arrangements, further facilitate cross-border investment by domestic and foreign investors, and better support the development of cross-border financing of enterprises.
Competing to visit China
Since this year, the policy dividend of further improving the convenience of foreign investment in China's assets has been released intensively, providing a "reassurance" for foreign institutions to enter the Chinese market.
On April 26, the CSRC issued the Opinions on Accelerating the High Quality Development of the Public Offering Fund Industry, proposing to support high-quality overseas financial institutions with long-term investment intentions in China's capital market to establish fund management companies or expand their shareholding ratio; On November 18, the People's Bank of China and the Administration of Foreign Exchange jointly issued the Provisions on the Management of Funds of Foreign Institutional Investors Investing in China's Bond Market, which improved and clarified the requirements for the management of funds of foreign institutional investors investing in China's bond market.
The convenience of foreign-funded institutions to come to China for business development has been constantly improved, and the scope of business and regulatory requirements have achieved national treatment. At present, more than 10 foreign-owned or wholly-owned securities fund futures companies, such as JPMorgan Chase, Goldman Sachs, Nomura and UBS, have been approved one after another, and foreign banks, such as Standard Chartered Bank, have obtained the fund custody qualification in their subsidiaries in China. Qiushui, BlackRock and other foreign private equity funds have successively set up 38 wholly-owned subsidiaries.
On November 25, Lubermay Fund announced that it had obtained the public fund business license issued by the CSRC, becoming the second foreign-funded fund management company newly established in China to carry out public fund business. Luboma Fund said that the continuous opening of the financial market and the increasingly perfect legal business environment have further enhanced Luboma's confidence and hope to further integrate into the development of China's capital market in the future.
A number of foreign institutions have begun to show their business in China. ICBC Wealth Management of Goldman Sachs, which was approved to open in June this year, launched the first financial product "Shengxinjun Intelligent Private Bank Exclusive Quantitative Equity Financial Product Phase 1" at the end of October, with a ceiling of 5 billion shares. Goldman Sachs ICBC Financial said earlier that after the early deep callback, the value of A shares is highlighting, and there is a large profit margin for long-term holding.
As the first wholly foreign-owned public offering, BlackRock Fund has issued three equity funds and one "fixed income+" fund since it was approved in June 2021, with diversified products. Lu Wenjie, the investment director of BlackRock Fund, said that A-share is a market with great breadth and depth, with a wide investment scope, many related target companies and good liquidity. As China's opening to the outside world continues to strengthen, it is believed that the integration of the global market and the Chinese market will be a long-term trend.
"More international excellent institutions enter the A-share market, which is a 'vote of confidence' for China's economic growth prospects and the profitability of Chinese enterprises. It can form a benign competitive interaction with domestic institutions, which is conducive to expanding the breadth and depth of China's capital market, and also conducive to the continuous improvement of the service capacity of related industries, helping China's economic development." Tian Lihui said. (Reporter Li Hualin)